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1986
Swift v. Tyson and the Brooding Omnipresence in
the Sky: An Investigation of the Idea of Law in
Antebellum America
William P. LaPiana
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Recommended Citation
20 Suffolk U. L. Rev. 771 (1986)
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SWIFT v. TYSON AND THE BROODING
OMNIPRESENCE IN THE SKY: AN INVESTIGATION
OF THE IDEA OF LAW IN ANTEBELLUM AMERICA*
by William P. LaPiana**
I.
INTRODUCTION
The nature of legal thought in antebellum America has become
an increasingly popular subject of scholarly inquiry. The results of
these inquiries are sometimes quite contradictory. All of them, however, must begin by acknowledging that the belief in law as a system
of principles which could claim the status of science appears again
and again in the rhetoric of certain antebellum lawyers. The attempt
of this "speaking aristocracy" of the bar to create a professional
science is explained most fully in Book II of Perry Miller's The Life
of the Mind in America.' The usefulness of Miller's analysis for
understanding American legal history before the Civil War has been
severely challenged by more recent works, especially Morton Horwitz's
The Transformation of American Law. 2 Horwitz views the judges
of the period as practitioners of legal instrumentalism, adherents of
a will theory of law which legitimized their manipulation of its
doctrines in favor of economic development and growth, often at
the expense of the least powerful people in society. To put it crudely,
seen in this light all the talk of science and ordered principles was
simply a self-serving sham. In fact, Horwitz portrays Joseph Story,
perhaps the most self-consciously scientific lawyer of his day, as
indulging in just this sort of double talk.'
Horwitz's description of what was really behind the judicial activity
of the pre-Civil War era has in turn stimulated other scholars. His
* Due to the specialized nature of the sources used, the author has certified to the
Suffolk University Law Review the accuracy of a substantial amount of the bibliographical
information.
** Assistant Professor of Law, University of Pittsburgh School of Law; A.B., A.M.;
J.D. Harvard University. This article is dedicated to the memory of Stephen W. Botein,
patient teacher, creative scholar, warm and good friend.
1.
P.
MILLER, THE LIFE OF THE MIND IN AMERICA FROM THE REVOLUTION TO THE CIVIL
WAR 98-265 (1965).
2. M. HORWITZ, THE TRANSFORMATION OF AMERICAN LAW, 1780-1869, 257 (1977).
3. Id. at 248-249.
SUFFOLK UNIVERSITY LAW REVIEW
[Vol. XX:771
emphasis on judges' making of law to deliberately further certain
social ends especially seems to have stirred debate. Randall Bridwell
and Ralph U. Whitten, for example, emphasize the consensual aspects
of the common law and the congruence between Story's thought and
judicial behavior and his belief in law as something greater than the
will of judges. 4 They use their reading of history to argue in favor
of a view of federalism and the Constitution which severely limits
the power of the judiciary.
More recently, the antebellum years have been assigned an important role as the pre-Classical period of American law in a division
of all American legal history into pre-Classical, Classical, and postClassical periods.' Many of those who utilize this classification scheme
devote themselves to the elucidation of the legal "consciousness" of
the three periods and disclaim any attempt "to link social and eco' 6
nomic factors with doctrinal development.
Each of these approaches has served to increase understanding of
American law before the Civil War. To some degree, however, they
are each mutually exclusive. Horwitz on one side and Bridwell and
Whitten on the other have widely differing views on the jurisprudence
of the period and consequently on the role judges played, or thought
they played. To put it simply, Horwitz sees nineteenth century judges
as positivists, consciously and happily making law. Bridwell and
Whitten, on the other hand, see the same judges as servants of a
view of law which exalts its customary aspect, a view which makes
them not the creators of rules but rather the enforcers of privately
arranged understandings. The elucidators of consciousness eschew
the attempt to do more than describe the structure of legal thought,
an operation which often seems to isolate the historical actors from
any sort of social or intellectual context.
The goal of this paper is to create a more complete and rounded
view of antebellum American law through the examination of one
small part of it, Joseph Story's famous decision in Swift v. Tyson 7
and the state courts' treatment of the point of negotiable instruments
4. R. BRIDWELL & R. WmTTEN, THE CONSTITUTION AND THE COMMON LAW passim (1977).
5. Chase, American Legal Education Since 1885: The Case of the Missing Modern, 30
N.Y.L. SCH. L. REv. 519, 523-27 (1985).
6. Alexander, The Dead Hand and the Law of Trusts in the Nineteenth Century, 37
STAN. L. REv. 1189, 1190-94, 1194 n. 10 (1985); Kennedy, Toward an Historical Understanding
of Legal Consciousness: The Case of Classical Legal Thought in America, 1850-1940, 3 REs.
L. & Soc. 3-24 (1980).
7. Swift v. Tyson, 41 U.S. (16 Pet.) 1, 18-19 (1842).
LAW IN ANTEBELLUM AMERICA
law involved in that case. Story's opinion is a useful entree to the
world in which it was created. It illustrates a possible connection
between changing law and a changing economy. The decision also
reveals much about its author's jurisprudence and links it to the
broad sweep of antebellum intellectual history.
In Swift Story decided a point of negotiable instruments law in
such a way as to promote the circulation of negotiable paper, clearly
aiding mercantile interests in society and giving short shrift to opposition to the doctrine of negotiability which itself expressed certain
anticommercial attitudes. 8 Because of the nature of the federal system,
Story had to decide which state's law would apply to the facts of
the case. Under section 34 of the Judiciary Act of 1789, which
required the courts of the United States to use as "rules of decision
in trials at common law" the "laws of the several states, except
where the constitution, treaties, or statutes of the United States shall
otherwise require or provide .
.
" it was arguable that the law
of New York State should be used. While the rule given by the New
York decisions was not clear, Story assumed that it would require
him to decide against negotiability and those interests many assume
he wished to promote. Story went on, however, to free himself from
New York precedents. He held that the word "laws" in section 34
did not include the decisions of state courts, and stated, "They are,
at most, only evidence of what the laws are, and are not of themselves
laws." Not bound, therefore, by the New York cases, the Supreme
Court was free "to ascertain, upon general reasoning and legal analogies ... what is the just rule furnished by the principles of com-
mercial law to govern the case."
9
8. For a thorough discussion of Swift and of the very real mercantile problems tied up
with the question decided see T. FREYER, FORUMS OF ORDER: TIlE FEDERAL COURTS AND
BUSINESS IN AMERICAN HISTORY 1-98 (1979) [hereinafter FORUMS OF ORDER]; see also M.
HORWITZ, supra note 2, at 218-20 (discussing anticommercial attitudes of opposition). Two
contemporary authors have discussed Swift as principally a case about commercial law and
not about federalism. T. FREYER, HARMONY AND DISSONANCE: THE Swirf AND ERIE CASES
tN AMERICAN FEDERALISM 17-43 (1981) [hereinafter HARMONY AND DISSONANCE]; Note, Swift
v. Tyson Exhumed, 79 YALE L.J. 284-310 (1969). The analysis in this paper differs from
both commentators in its attempt to place Story's jurisprudence squarely within the context
of antebellum thought and to describe more fully the nature of the general principles of law
which Story and his contemporaries saw as governing the question presented in the Swift
case. In this way, it is hoped that this paper will contribute to elucidating what Professor
Freyer in his excellent study describes as the "ambiguity" shrouding "the theoretical underpinnings of the idea of general commercial law." HARMONY AND DISSONANCE, supra, at
43; cf. Note, supra, at 294 n.50 (no idea of "some entity called The Common Law" exists
in Story's opinion).
9. Swift v. Tyson, 41 U.S. (16 Pet.) 1, 18-19 (1842).
SUFFOLK UNIVERSITY LA W REVIEW
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This general law existing above and beyond the decided cases has
been an object of derision. Holmes mocked it as a "brooding omnipresence in the sky" and John Chipman Gray found the key to
the entire Swift opinion in Story's "restless vanity."' 0 The most
important point in the discussion that follows is the assertion that
the jurisprudence of Story's opinion accurately reflects one facet of
the legal thought of his time which in turn was in harmony with
antebellum notions of science taken in a broad sense. A secondary
point is that the opinion also reflects the institutional role of the
pre-Civil War judge, a role which allowed and even demanded a
sort of judicial activism, even though this activism was not the sort
that "made" law. Each assertion is buttressed by a detailed examination of the state court opinions dealing with the substantive
issue decided in Swift. This examination reveals widespread agreement
with Story's jurisprudence of commercial law and equally widespread
disagreement with some of his conclusions. It also reveals that the
state of the "law" on the question decided in Swift was a matter
of dispute, both before and after Story's opinion, and hints that it
will be most difficult to elucidate a clear relationship between the
opinions of the courts and broader social and economic trends."
II.
A.
STORY's LEGAL SCIENCE
Law as a System of Principles
Story defined the common law in this way: "It is rather a system
of elementary principles and of general juridical truths, which are
continually expanding with the progress of society, and adapting
themselves to the gradual changes of trade, and commerce, and the
'1 2
mechanic arts, and the exigencies and usages of the country.'
Law is a system of principles and thus law is a science because every
science is a system of principles. Bacon said so, and the prestige of
Bacon in antebellum America was immense. Allegiance to "Bacon-
10. Southern Pac. Co. v. Jensen, 244 U.S. 205, 222 (1917) (Holmes, J., dissenting); J.
GRAY, THE NATURE AND SOURCES OF THE LAW 253 (2d ed. 1921).
11. See Katz, Sullivan & Beach, Legal Change and Legal Autonomy: Charitable Trusts
in New York, 1777-1893, 3 L. & HIST. REv. 51, 88-89 (1985) (difficult linking appellate
opinions to social and economic conditions).
12. J. STORY, Codification of the Common Law in THE MISCELLANEOUS WRITINGS OF
JOSEPH STORY 702 (W. Story ed. 1852) [hereinafter MISCELLANEOUS WRITINGS].
1986]
LA W IN ANTEBELLUM AMERICA
ianism" was "a mark of scientific orthodoxy."' 3 Of course, Baconianism meant different things to different people, but according
to one scholar, who considered most scientists' use of the term, it
"implied a kind of naive rationalistic empiricism-a belief that the
method of pure empiricism consistently pursued would lead to a
rational understanding of the universe."' 4 Such a view of science
could easily encompass the common law. What are individual cases
but the data to be observed? What is to be drawn from an observation
of all cases but legal principles, the ordering of which will lead to
a rational understanding of the legal universe? One of the new nation's
first law teachers, James Wilson, made the common law's status as
a Baconian science explicit for his auditors. A science, according to
Wilson, is "best formed into a system, by a number of instances
drawn from observation and experience, and reduced gradually into
general rules."' 5 Wilson argues that the workings of the human mind
demand such a course:
The natural progress of the human mind, in the acquisition of knowledge, is from particular facts to general principles. This progress is
familiar to all in the business of life; it is the only one, by which
real discoveries have been made in philosophy; and it is the one, which
has directed and superintended the insaturation of the common law.
In this view, common law, like natural philosophy, when properly
16
studied, is a science founded on experiment.
Progress is made in the field of natural philosophy by observing the
phenomena of the material world; law progresses by observing the
"phenomena" of men and society. The consequence is the regime
of principles: "Hence, in both, the most regular and undeviating
principles will be found, on accurate investigation, to guide and
'
control the most diversified and disjointed appearances. 17
Wilson's observations were echoed again and again in the public
pronouncements of numerous antebellum lawyers.' 8 Story himself paid
13. G. DANIELS, AMERICAN SCIENCE IN THE AGE OF JACKSON 65 (1968); see generally T.
BOZEMAN, PROTESTANTISM IN AN AGE
OF SCIENCE: THE BACONIAN
IDEAL AND ANTEBELLUM
RELIGIOUS THOUGHT 23-30 (1977).
14. T. BOZEMAN, supra note 13, at 23-30.
15. 2 J. WILSON, WORKS OF THE HONORABLE JAMES WILSON, L.L. D. 43 (1804).
16. Id. at 43-44. For the story of the creation of. Wilson's lecture course see C. SMITH,
JAMES WILSON, FOUNDING FATHER, 1742-1798, 308-09 (1956).
17. J. WILSON, supra note 15, at 43-44.
18. See P. MILLER, THE LEGAL MIND IN AMERICA FROM THE INDEPENDENCE TO THE CIVIL
WAR passim (1962)
observations).
(materials collected in Miller's edition serve as examples
of Wilson's
SUFFOLK UNIVERSITY LAW REVIEW
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XX:771
tribute to Bacon many times in writings discussing the general nature
of law and its growth. He stated that the triumph of Lord Bacon's
method of induction, "that is, . .
a minute examination of facts,
or what may properly be called experimental philosophy," made
possible the liberation of his age from the bondage of intellectual
timidity of the sort which imprisoned Galileo and led to the initial
rejection of Newton. 19 The effects could be found in every branch
of knowledge. Medicine had been freed from "vague conjecture and
bold pretension" by "instructed skill, patient observation, and accurate deduction. ' 20 Chemistry was no longer "an occult science,
full of mysteries and unedifying processes, abounding in theories,
and scarcely reducible to any rational principle." Rather, it grew
into a science because the "laws of chemical action have been examined and ascertained with great accuracy, and can now be demonstrated with as much clearness and facility, as any of the laws
which belong to mechanical philosophy.' '21 Through the use of observations "every irregularity and perturbation of the motions of the
heavenly bodies [has been found] to depend upon the same eternal
law of gravitation." '22 Nor was law deprived of the benefits of the
"induction of philosophical inquiry." The patient accumulation and
ordering of the experience of many nations has transformed commercial and maritime law especially. The glory of the process moved
an apologetic Story to a striking use of metaphor:
Industry and patience first collected the scattered rays, emitted from
a thousand points through the dim vista of past ages; and philosophy
reflected them back with tenfold brilliancy and symmetry. If, indeed,
a professional mind might indulge in a momentary enthusiasm, it
would perceive, that in this process had been realized the enhancement
and wonder of the kaleidoscope, where broken and disjointed materials,
however rude, are shaped into inexhaustible varieties of figures, all
perfect in their order and harmonies, by the adjustment of reflected
23
light under the guidance of philosophy.
Story seems to have been one of many adherents of the view that
a careful study of decided cases would reveal true principles through
19.
20.
21.
22.
23.
Characteristics of the Age, in
Id. at 354.
Id. at 354, 483.
Id.at 356.
Id. at 99.
MISCELLANEOUS WRITINGS
supra note 12, at 350-51, 479.
LAW IN ANTEBELLUM AMERICA
the process of induction.2 4 Exactly what those principles are is not
easily understood. It was conventional to praise the principles of the
common law as embodying all that is moral and right. As John
Milton Goodenow put it, "natural justice and right reason are the
foundation of all our private rights," which the common law upholds,
and "natural justice and reason are the same in all countries and
in all ages." ' 25 Given such principles, the rule or rules deciding any
given case should be easily deduced. As one New York State judge
stated in 1855:
The common law consists of those principles and maxims, usages and
rules of action which observation and experience of the nature of
man, the constitution of society and the affairs of life have commended
to enlightened reason, as best calculated for the government and security
of persons and property. Its principles are developed by judicial decisions as necessities arise from time to time demanding the application
of those principles to particular cases in the administration of justice.
The authority of its rules does not depend upon positive legislative
enactment, but upon the principles which they are designed to enforce,
the nature of the subject to which they are to be applied, and their
26
tendency to accomplish the ends of justice.
A generation earlier, New York Senator John C. Spencer, speaking
as a judge of New York's highest court, described the flexibility of
the common law as consisting not of the alteration of its principles
"but in the application of old principles to new cases, and in the
modification of the rules flowing from them, to such cases as they
arise, so as to presume the reason of the rules and the spirit of the
law. ''27
Yet Story himself acknowledged the possibility of the discovery
of new principles. His was an age, in his eyes, of wonderful change.
He noted that the Baconian method, "the habit of nice observation
of facts (the almost constant attendant upon scientific acquirements)
has led to surprising conjectures, which have ended in the dem-
24. See D. MAYES, AN INTRODUCTORY LECTURE DELIVERED TO THE LAW CLASS OF TRANUNIVERSITY ON THE 5TH OF NOVEMBER 1832, 6-7 (1832) (available at Library of
Congress) ;Dixon, Art. III-Codification, and Reform of the Law-No.], 14 Am. JURIST 283
(1835); Noyes, Art. III-The Legal Rules Governing the Enjoyment and Use of Light, 23
AM. JURIST 58-59 (1819).
25. J. GOODENOW, HISTORICAL SKETCHES OF THE PRINCIPLES AND MAXIMS OF AMERICAN
JURISPRUDENCE 36 (1819 & photo. reprint 1972).
26. People v. Randolph, 2 PARKER'S CRIM. RPTR. 174, 177 (1855).
27. Rensselaer Glass Factory v. Reid, 5 Cow. 587, 628 (N.Y. 1825).
SYLVANIA
SUFFOLK UNIVERSITY LA W REVIEW
[Vol. XX:771
onstration of equally surprising truths. ' 28 In turn, these newly established principles were put to practical use in the arts, giving society
inventions ranging from the cotton gin to the steamboat. Along with
these material changes, the expansion of commerce greatly changed
America. Whole new categories of transactions between man and
man became common. Story observed, "Policies of insurance, bills
of exchange, and promissory notes, and shipping contracts, and
charter-parties, are the growth of thriftier trade, and more extensive
29
mercantile enterprise. They have grown up almost in our own day."
A willingness to admit the discovery of new principles casts some
doubt on the fundamental nature of legal principles in general, especially when these new principles are concerned with trade and
commerce and seem designed to further the interest of those involved
in commerce at the expense of other segments of society.
Yet commercial law was widely considered to be a particularly
fine example of law as a science of principles. Expressions of the
principled nature of the commercial law can be gathered from the
beginning of the nation to the period contemporary with Story's
decision. In his law lectures given in the winter of 1790-1791, James
Wilson described the law of merchants, as he called it, to be part
of the law of nations. It was a "system which governed a wide
variety of mercantile transactions." More importantly, however, Wilson stated "this system has, of late years, been greatly elucidated,
and reduced to rational and solid principles, by a series of adjudications, for which the commercial world is much indebted to a
celebrated judge [Lord Mansfield], long famed for his comprehensive
talents and luminous learning in general jurisprudence." 3 0 A decade
later, William Cranch, judge of the federal circuit court for the
District of Columbia, and Supreme Court reporter, wrote an elaborate
essay published in an appendix to his fifth volume of reports, en-
28. Developments of Science and Mechanic Art, in MISCELLANEOUS WRITINGS supra note
12, at 496.
29. Chancery Jurisdiction, in MISCELLANEOUS WRITINGS, supra note 12, at 154. At least
one observer of the American legal scene, however, drew the opposite conclusion from the
law's response to these changed conditions:
The circumstance that the law of insurance, being of recent introduction into English
jurisprudence, is governed by principles of a more enlightened policy, and a sounder
morality, than pervade the older branches of the law, goes far to show that the common
law has not that happy facility in adopting itself to the new relations, and enlarged
knowledge of the community, for which it is so much extolled by its admirers. Verplanck's
Essay on Contracts, 2 N.Y. REv. & ATHANEUM MAG. 109 (1826).
30. J. WILSON, supra note 15, at 375.
1986]
LAW IN ANTEBELLUM AMERICA
deavoring to show that promissory notes were negotiable under the
common law. He believed that the principles of the law of merchants
had always been part of the common law, but had been in abeyance
for the long period in which little commerce took place and legal
questions primarily involved land law and pleas of the Crown. Once
again, Lord Mansfield played a key role in linking the principles
governing the world of commerce with the mechanism of the common
law. William Cranch observed,
His sagacity discovered those intermediate terms, those minor propositions, which seemed wanting to connect the newly developed principles of commerical law, with the ancient doctrines of the common
law, and to adapt the accustomed forms to the great and important
purposes of substantial justice, in mercantile transactions. 3
James Sullivan, attorney general of Massachusetts, was also an
admirer of Lord Mansfield. Sullivan included in his 1801 work entitled
The History of Land Titles in Massachusetts some general observations which included his views on commercial law. Sullivan noted
that since "contracts arose from commerce" they should be governed
"by the jus gentium, the law of nations, known and established over
the commercial world." '3 2 He observed that although there are no
acts of any particular legislature dealing with insurance policies, bills
of exchange, charter parties or freight, "we find the same forms of
contract, the same manner of construction, and the same remedies,
all over the world."" He did admit that the English Parliament
passed an act dealing with negotiable notes-the famous Statute of
Anne-but noted that it "ought, in a government made up of a
system of principles, to have been done by the judicial power. Had
Mansfield then been on the bench, he would probably have done
''34 Once
it.
again, the regime of principles was given life by the
judges. In the United States, however, the Constitution gives the
government of the United States the power of regulating commerce
between the states. Unfortunately, the first Congress in the Judiciary
31. Dunlop v. Silver, 5 U.S. (1 Cranch) 367, 375 app. (A) (1801); see M. HORwrrz supra
note 2, at 221-22 (discussing Cranch's place in history of negotiability and circumstances
surrounding writing of essay). Peter S. Du Ponceau also believed that commercial law was
part of the common law, at least in theory. P. Du PONCEAU, A DISSERTATION ON THE NATURE
AND EXTENT OF THE JURISDICTION OF THE COURTS OF THE UNITED STATES 122 (1972).
32. J. SULLIVAN, THE HISTORY OF LAND TITLES IN MASSACHUSETTS 352 (1834 & reprint
1972).
33. Id.
34. Id.
SUFFOLK UNIVERSITY LA W REVIEW
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Act tied the hands of the federal courts by requiring that the law
of the several states be regarded as the rules of decision. Sullivan
seemed to believe, therefore, that the United States courts could not
give effect to a uniform interpretation of the universal principles.
The problem could be solved, however, through the passage by Congress of a statute directing "that all courts within the United States
shall give to all personal contracts made within the United States
a uniform construction, according to the tenor of the contract, and
such as is usual in, and agreeable to the proceedings of commercial
nations." 3 5 Although the Massachusetts attorney general and the Massachusetts justice apparently did not agree on the scope of the justice's
power as a federal judge, they did agree on the nature of the law
he was to serve.
Uncritical admiration of Mansfield was not, however, universal.
In 1831, the anonymous author of an article on Mansfield's opinions
on commercial law published in The American Jurist criticized the
judge for depending too much upon mercantile usage for resolution
of the problems which confronted him, and for omitting explanations
of his reasoning. 36 The author opined that such judicial behavior
did a disservice because it encouraged the bar to lose itself in particulars and lose sight of "those broad and luminous principles,
which, if pursued and always kept in view, raise the law into the
' 7
rank of a liberal science."
William Kent also emphasized the role of principles in deciding
questions of commercial law. The younger son of the great Chancellor
Kent was one of the first professors in the law school founded at
the University of the City of New York in 1838. In his inaugural
address, he too expressed the belief that "the law of commerce is
not confined and local, but, the production of many countries and
ages, [and] is in most respects common to them all, and uni35. Id. at 353-54.
36. Art. VI-Opinions of Lord Mansfield on Commercial Law-His Judicial Character,
6 AM. JURIST 65, 70, 82 (1831).
37. Id. at 66. A similar opinion as to usage in general was expressed in the same journal
four years later: "This mode of establishing a law (by usage) seems to us to be peculiarly
unfortunate ....
It is to be regretted that any part of the system should thus be the result
of accident, rather than settled by an analogy to other rules, and on due consideration of
men skilled in the science of the law." Dixon, Art. Ill-Codification and Reform of the
Law-No. 1, 14 Am. JURIST, 280, 295-96 (1835).
The American Jurist was edited in Boston by lawyers who had been Story's students at
Harvard. It "generally praised the judge [Story] and circulated his ideas." R. NEWmYER,
SUPREME COURT JUSTICE JOSEPH STORY, STATESMAN OF THE OLD REPUBLIC 168-231 (1985).
19861
LA W IN ANTEBELLUM AMERICA
form .. ."38 In dealing with problems of commercial law, therefore,
''we may apply in our discussions for the aid of universal reason,
of all ages and countries." 3 9 In fact, the continental part of commercial law has passed through the same development as the common
law and is as much a science as its Anglo-American cousin. It too
has grown through the logical deduction of decisions from earlier
ones which in turn became the source of "new deductions and principles."
Thus finally grew up a science-to a casual observer, vague and undefined, but known to those who thoroughly studied it, to excel every
other system in the rigidly logical connexion and dependence of its
parts. Now all such parts of commercial law, as are of continental
origin, have become amalgamated in one system, and subject as much
to the operation of the rule last alluded to [of scientific development],
as the most ancient and peculiar portions of the common law.In his Course of Legal Study, David Hoffman spoke his piece on
the lex mercatoria, as he called it, admitting that its relationship to
the law of nations and to the common law had been explained in
many different ways. He had his own definition, however, which
emphasized both usage of merchants and the organizing role of
principle:
The lex mercatoriaof any particular country, as for example England,
may perhaps be defined, as a system of principles or rules peculiarly
regulating mercantile transactions, derived principally from the customs
of merchants in different nations, from the usages, either general or
local, of the merchants of England, which customs or usages of foreign
or English merchants have been judicially sanctioned; and lastly from
4
express legislative provision. 1
American law merchant theories, therefore, would be based on
American practices, as well as principles whose existence transcends
national boundaries, although the exact mix of these two elements
was never precisely described. Given the emphasis on practical results,
perhaps no precise formula was possible or desired. Story best summed
up the general attitude in an 1839 case decided on circuit. Confronted
38. Kent, The Rise and Progressof Commercial Law in English Jurisprudence,in
ADDRESS,
INAUGURAL
DELIVERED BY THE PROFESSORS OF LAW IN THE UNIVERSITY OF TE CITY OF NEW
YORK 45-49 (1838) (available at the New York Public Library).
39. Id.
40. Id.
41. D. Ho rNaA, A COURSE OF LEGAL STUDY 416 (1846 & reprint 1968).
SUFFOLK UNIVERSITY LAW REVIEW
[Vol. XX:771
with a question involving the appropriate rate of exchange between
a foreign currency and the dollar to be used in settling a mercantile
debt, Story set out the relationship between usage and principle
stating:
In all cases which respect the daily transactions of commercial men,
I feel a great desire not to interfere with the known and settled habits
of business; and should rather incline to follow the usage, if any,
than to form a new rule of my own. No settled usage has been shown;
and, therefore, the rule must be settled upon principle.
His final decision is given "upon just principles of law, applied to
42
the contract."
B.
Principlesfor a Commercial Nation
In spite of all the talk of just principles, the frank acceptance of
"usage" coupled with the palpable practical benefits commercial
interests received from Story's opinion in Swift seem to explain the
decision so well that his jurisprudential explanation for the decision
has been scorned as either naive or simply a smokescreen for an
exercise in judicial lawmaking based upon a will theory of law. 4 3
The analysis has been supported by asserting that anyone who, like
Story, writes a treatise on the subject of conflict of laws must in
the end believe in a will theory of law. 44 It is true that the basic
idea of Story's treatise, Commentaries on the Conflict of Laws, is
that nations are sovereign within their territory and that they are
not obligated to enforce the laws of other nations. They do so only
through the operation of comity, a recognition of those foreign laws
for the sake of the functioning of international society, limited by
the paramount importance given the interests of the final nation and
of its people. "The true foundation," Story wrote, "on which the
administration of international law must rest, is, that the rules, which
are to govern, are those, which arise from mutual interest and utility,
from a sense of the inconvenience, which would result from a contrary
doctrine, and from a sort of moral necessity to do justice, in order
that justice may be done to us in return. ' 45 In short, the entire field
of study seems to be based upon practicality, something quite different
42. Grant v. Healy, 10 F. Cas. 978, 979 (C.C.D. Mass. 1839) (No. 5696).
43. M. HORWITZ, supra note 2, at 245-52.
44. M. HORWITZ, supra note 2, at 245-52; Jay, Origins of the Federal Common Law,
133 U. PA. L. REV. 1231, 1266 n.185 (1985).
45. J. STORY, COMMNTARIES ON THE CONFlICT OF LAWS 7-9, 37 (1834 & reprint 1972).
1986]
LA W IN ANTEBELLUM AMERICA
from the existence of some body of law above and beyond institutions
and states. Even the idea of justice is invoked in a practical way
which seems to equate it with the avoidance of inconvenience.
Yet Story does not abandon the idea of general principles of
substantive law which judges can and must articulate. In the first
place, many of the conflicts he describes are of what he calls "positive" rules-rules created by government. The difference between
these rules and those promulgated by 43 courts is clear in his discussion
of the opinion of the Supreme Court of Louisiana in Saul v. His
Creditors.6The Louisiana court grappled with the distinction between
"personal" and "real" statutes; the former often held by learned
commentators on the subject of conflict of laws to follow the citizen
or subject wherever he goes, the latter to be restricted to operation
within the jurisdiction promulgating them.4 7 It is generally said, according to the Louisiana court and Story, that laws setting the age
of majority are personal. 41 Yet the court considered the following
two cases. In the first, a twenty-four year old domiciliary of country
A where the age of majority is twenty-one years makes a contract
in Louisiana, where the age of majority is twenty-five years. Both
jurisdictions would hold that contract to be valid. But suppose, as
was the fact, that the age of majority in Louisiana was twenty-one
years and the law of country A set the age at twenty-five. If the
twenty-four-year-old domiciliary of country A made a contract in
Louisiana
would it be permitted, that he should in our courts, and to the demand
of one of our citizens plead, as a protection against his engagements,
the laws of a foreign country, of which the people of Louisiana had
no knowledge? And would we tell them, that ignorance of foreign
laws, in relation to a contract, made here, was to prevent him from
enforcing it, though the agreement was49 binding by those of their own
state? Most assuredly we would not.
Story finds the resolution of the two hypotheticals inconsistent with
the proper functioning of a court.
The case first put seems founded upon a principle entirely repugnant
to that, upon which the second rests. In the former, the law of the
domicil of origin is allowed to prevail; in the latter, that of the domicil
46.
47.
48.
49.
Id. at 73 n.1.
5 Mart. (n.s.) 569 (La. 1827).
Saul v. His Creditors, 5 Mart. (n.s.) at 597; J. STORY, supra note 45, at 71-72.
Saul v. His Creditors, 5 Mart. (n.s.) at 597-98.
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of the contract. Such a course of decision certainly may be adopted
by a government, if it shall so choose; but then it would seem to
stand upon mere arbitrary legislation and positive law, and not upon
principle.
The difficulty is in seeing how a court, without such positive legislation, could arrive at both conclusions. General reasoning would
lead us to the opinion, that both cases ought to be decided the same
way; that is, either by the law of the domicil of origin or by that
of the domicil of the contract.5 0
Bound by reason, courts cannot have the same freedom to make
rules as governments do.
A slightly different situation is discussed in the chapter dealing
with "foreign contracts." There Story again finds a mistaken court,
but also finds that authorities agree upon a general rule which properly
reflects principle and which therefore should be followed.5 In Grimshaw v. Bender, the Massachusetts supreme judicial court held that
damages for dishonor of a bill of exchange drawn in England on
a Boston firm but payable in England and accepted in England by
a member of the firm were governed by Massachusetts law.1 2 Story
criticized this conclusion as violating "the general principle of law, ...
that a contract or acceptance is to be deemed made, where the contract
or acceptance is perfected . . ." which in this case is England.5 3 That
principle is asserted not only by learned commentators but also by
"modern authorities"-cases from the United States Supreme Court,
South Carolina and England.54 In addition, a New York case, Foden
v. Sharp, found in a very similar situation that the English rule of
damages should be followed because the bill had been drawn and
accepted in England." Story noted "[tihis decision, being in entire
harmony with the general principles on this subject, will probably
obtain general credit in the commercial world.' '56
The commercial world should give general credit to this and other
principles because they are a part of a body of law appropriate to
that world. At the heart of the belief in an appropriate body of
law is Story's explanation of why laws differ from nation to nation.
50.
51.
52.
53.
54.
55.
56.
J. STORY, supra note 45, at
J. STORY, supra note 45, at
6 Mass. 157, 161-62 (1809).
J. STORY, supra note 45, at
J. STORY, supra note 45, at
J. STORY, supra note 45, at
J. STORY, supra note 45, at
74.
265.
266.
266.
266.
266.
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LAW IN ANTEBELLUM AMERICA
Some variations are caused by the physical world. "Climate, and
geographical position, and the physical adaptations springing from
them, must at all times have had a powerful influence in the or-
ganization of each society, and have given a peculiar complexion
and character to many of its arrangements. 5 7 One rule resulting
from these factors is that which governs the age of majority. Story
notes that most writers prefer that the law of a person's domicil of
birth control questions of capacity because "each state is presumed
to be the best capable of judging from the physical circumstances
of climate or otherwise, when the faculties of its citizens are morally
or civilly perfect for the purposes of society."5 " Other differences
are attributable to "peculiarities of religious opinion or conscientious
doubt." 5 9 Rules governing marriage are often of this sort, as are
many rules of personal disqualification, at least those "not arising
from the law of nature." "Hence, the disqualifications resulting from
heresy, excommunication, Popish recusancy, infamy, and other penal
disabilities, are not enforced in any other country, except that, in
which they originate."
6
None of these rules can be reconciled with
57. J. STORY, supra note 45, at 1. The importance ascribed to the influence of climate
can be seen in cases dealing with the common-law presumption that no male under the age
of fourteen years is capable of committing the crime of rape. The Ohio Supreme Court
explained the origin of the presumption in terms of climate:
Now, in the moist and cold climate of England and most of the countries of northern
Europe, it is so seldom that an infant under the age of fourteen is capable of emission
[of semen], that it is assumed as a fact that, prior to that age he is never capable;
and hence, under that age, no one can be convicted of rape ....
It is an admitted
law of physiology, that climate, habit, and condition of life, have much influence in
hastening or retarding the age of puberty.
In our climate, the age of puberty is frequently earlier than in that of England or
the more northern States of this Union. Therefore, the Court holds that in Ohio the
rule is an infant under fourteen is presumed incapable of committing rape but the
presumption is rebuttable by proof that he has arrived at puberty.
Williams v. State, 14 Ohio 222, 226-227 (1846).
A similar case in New York, decided in 1855, comes to the same conclusion on identical
reasoning, stating the fact that "in this state, having a population composed of almost every
variety of races and a climate as various as its population," males frequently come to puberty
before the age of fourteen requires a modification of the common-law presumption. The
"principle of presumptive evidence . . . that when experience shows a uniform connection or
inconsistency between any two facts, upon proof of one of those facts, the existence or the
absence of the other will be conclusively presumed, according to the uniform result of such
experience" is not changed, only the rule which requires the presumption of impossibility is
changed. People v. Randolph, 2 PARKER'S CIuM. RPTR. 174, 178-179 (1855).
58. J. STORY, supra note 45, at-70.
59. J. STORY, supra note 45, at 107-08.
60. J. STORY, supra note 45, at 97.
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one another. None is entitled to unquestioning enforcement by a
foreign state in preference to its own laws and policies.
Differences also arise from the economic character of nations.
Story observed:
Nations inhabiting the borders of the ocean, and accustomed to maritime intercourse with other nations, would naturally require institutions
and laws, adapted to their pursuits and enterprises, which would be
wholly unfit for those, who should be placed in the interior of a
continent, and should maintain very different relations with their neigh6
bors, both in peace and war. '
These nations are the commercial world, and they have, or should
have, a body of law which is appropriate to the carrying on of
commerce. The importance of appropriate rules is clearly shown in
Story's discussion of the principle that items of personal property
have no fixed situs but follow the person, that is, they are governed
by the law of the domicil of their owner and not by the law of the
place where they happen to be. After reviewing the reasoning of
several European jurists in support of this rule, Story concludes that
the rule must be grounded "in an enlarged policy growing out of
their [items of personal property's] transitory nature and the general
convenience of nations. ' ' 62 The competing rule, making items of
personal property subject to the law of their actual situs, would
make it most difficult for the owner to deal with personal property
which might be in transit or otherwise involved in trade which carries
it from place to place. Story reasoned that the resulting evils would
affect "the subjects and the interest of all civilized nations."
But in maritime nations, depending upon commerce for their revenues,
their power, and their glory, the mischief would be incalculable.
A sense of general utility, therefore, must have first suggested the
doctrine; and as soon as it was promulgated, it could not fail to
recommend itself to all nations by its simplicity, its convenience, and
631
its enlarged policy.
Clearly, then, the commercial nature of certain nations makes
certain rules appropriate for them. Law must then reflect the needs
of these commercial societies since "it is obvious, that the law must
fashion itself to the wants, and in some sort to the spirit of the
61. J. STORY, supra note 45, at 2.
62. J. STORY, supra note 45, at 311.
63. J. STORY, supra note 45, at 312.
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LAW IN ANTEBELLUM AMERICA
age." 64 Other sorts of societies have other sorts of spirits, however,
and their law would presumably be different from that of commercial
societies. Story has been described as a creature of the American
Enlightenment, 65 and in his description of the sources of differences
among nations, between their spirits, he reflects the ideas of one of
the most important figures of enlightenment, Montesquieu. In The
66
Spirit of Laws, Montesquieu essayed an explanation of nationhood.
At the beginning of his work, he explained the relationship between
law and society in terms which Story would echo in his work on
conflicts:
Law in general is human reason, inasmuch as it governs all the inhabitants of the earth; the political and civil laws of each nation ought
to be only the particular cases in which this human reason is applied.
They should be adapted in such a manner to the people for whom
they are made, as to render it very unlikely for those of one nation
to be proper for another.
They should be relative to the nature and principle of the actual,
or intended government; whether they form this principle, as in the
case of political laws, or whether they support it, as may be said of
civil institutions.
They should be relative to the climate, whether hot or cold, of each
country, to the quality of the soil, to its situation and bigness, to
the manner of living of the natives, whether husbandmen, huntsmen,
or shepherds; they should have a relation to the degree of liberty
which the constitution will bear; to the religion of the inhabitants,
to their inclinations, riches, number, commerce, manners, and customs.
In fine they have relations amongst themselves, as also with their
origin, with the object of the legislator, and with the order of things
on which they are established, in all which different lights they ought
to be considered.
This is what I have undertaken to perform in the following work.
These relations I shall examine, which form all together that we call
the Spirit of laws. 67
Montesquieu had great influence in the Revolutionary generation,
and it is tempting to see Story's echo of his thought as yet another
64. Growth of the Commercial Law, in MISCELLANEOUS WRITINGS supra note 12, at 279.
65. R. NEWMVYER, supra note 37, at 387-89.
66. MoNTESQUiEU, THE SPmrr OF LAWS passim (T. Nugent trans. 1750; Carrithers ed.
1977); see R. FERGUSON, LAW AND LETTERS IN AMERIcAN CULTURE 47 (1984); P. STEIN, LEGAL
EVOLUTION: THE STORY OF AN IDEA 64 (1980).
67. MONTESQUIEU, supra note 66, at 104-05.
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sign of the jurist's deep personal attachment to the legacy of the
American Revolution. 61 In addition, Montesquieu "was vague as to
the process of change and did not offer any scheme of legal development." ' 69 His stopping short of a theory of legal evolution may
play some role in the lack of a sense of historical development in
antebellum legal thought noted by Perry Miller and generalized to
the entire early nineteenth century intellectual scene by Dorothy Ross. 7 0
Ross draws an important distinction between a "static" sort of historical consciousness which emphasizes "long-standing and universal"
processes as opposed to a view which sees change as "the product
of merely local, temporary condition. ' ' 71 She traces the strength of
the former to its link to the ideology of republicanism and to Protestant religion both of which helped to invest America with millennial
significance.7 2 Thus it is possible to see antebellum expressions of
belief in the progress of nations or peoples through various stages
of development culminating in the passage from a feudal to a modern,
liberal, and commercial society as compatible with a belief in universal
principles and in a divine hand behind the historical process.7 3 Without
a clear idea of the link between legal change and specific concrete
changes in society, the sovereignty of relatively unchanging universals
is easier to sustain.
This sustainable belief also helps to elucidate the link between law
and science. Baconian science was devoted to the discovery of the
principles behind the functioning of the universe. The principles were
real and true because, in the end, they were expressions of the Creator.
The result of Baconian science, properly done, was a better un-
68. Story's concern with the perpetuation of the proper understanding of the American
Revolution and of the republic it created is the pervading theme of R. NEWMYER, supra note
37.
69. P. STEIN, supra note 66, at 17.
70. See Ross, Historical Consciousnessin Nineteenth-Century America, 89 AM. HIST. REV.
(1985) (quoting and elaborating on theory developed in Perry Miller's Life of the Mind).
71. Ross, supra note 70, at 917.
72. Ross, supra note 70, at 911-13.
73. Ross, supra note 70, at 919-20. Compare Elliott, The Evolutionary Tradition in Jurisprudence, 85 COLUM. L. REV., 38, 38-40 (1985) (considering as "evolutionary" legal theories
which analogize the development of law "explicitly to the theory of evolution in biology"
thereby drawing a useful distinction between Montesquieu and the "evolutionary tradition")
with Alexander, supra note 6, at 1219-24 (discussing logic of historical thesis of a commercial
policy and policy of alienability) and Gordon, Critical Legal Histories, 36 STAN. L. REV. 57,
59-67 (1984) (discussing dominant view of evolutionary functionalism in America over last
150 years).
LAW IN ANTEBELLUM AMERICA
derstanding of God: "Since the natural world was a Divine construct,
' 7' 4
its investigation could only advance the cause of belief.
It is not unreasonable to see a similar attitude in antebellum treatment of what today is considered social science. The social world,
no less than the natural, is created by God. Differing societies may
be organized along different lines, but all are subject to some set
of laws, an understanding of which reveals the Creator. In short,
for Protestant, commercial, enterprising America there was a truth
governing the questions which came before the courts that was incumbent on the judges to articulate.
C. Fallible Lawmakers
The truths of commercial law were to be understood through
scientific investigation. Decided cases which both applied principles
and summed up results of prior investigations into the nature of the
principles were the subject of investigation. Inductive science and
deductive application were bound together, but they always served
the greater truth. 75 Judges were investigators who sought to serve
truth by determining "just principles" and then applying them to
a concrete case. It was not an easy task. In fact, it seems to have
been commonplace to admit that judges could fall into error and
to warn against reliance on a case rather than on the principles upon
which the decision should rest. In 1832, Daniel Mayes told his students
at Transylvania University just as Story would some ten years later,
that decisions are only evidence of the law. 76 An author in the
American Jurist stated much the same thing in arguing for a limited
sort of codification of the common law, noting that it is no wonder
that decisions conflict with each other since precedents can be overlooked and judges sometimes simply lack capacity. 77 But the most
interesting statement of this idea comes in a lecture by William Curtis
Noyes to the Law Association of New York in 1840 on the subject
of "The Legal Rules Governing the Enjoyment and Use of Light."
The question of acquiring rights to light through prescription was
74. T. BozEmAN, supra note 13, at 75-86.
75. T. BOZEMAN, supra note 13, at 64-70 (cogently discussing the relationship between
induction and deduction). Bozeman shows that the formula Richard Whatley put forth in his
1826 Elements of Logic, that Bacon intended "merely to direct [deduction] to its proper use,
that is, as an interpreter of principles established inductively" became an important part of
American scientific thought. T. BozEMAN, supra note 13, at 64-70.
76. D. MAYES, supra note 24, at 6-7.
77. Dixon, supra note 24, at 283.
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an important one in the growing towns of early nineteenth century
America. 7 Noyes pleaded for a principled resolution of the issue
and added a comment which says a good deal about attitudes toward
cases as sources of law:
I may be permitted to remark here, for the encouragement of bold
and independent thought and investigation on the part of the members
of our profession, that this history furnishes a salutary example of
the danger of following cases implicitly, without an inquiry into the
principles upon which they are based.
The greatest and wisest judges frequently fall into error, and it is
our province to point them out and thus to correct and amend them.
Let your minds be well stored with legal principles, and there is little
danger of being lost or long led astray among the mass of cases, with
which we are and I fear will continue to be overburdened.
Scrutinize every case with rigor, take no man's mere opinion for
law, apply to it the infallible test of principles, and if it will not stand
this trial, it may safely be disregarded and eventually will find its
79
appropriate place among "cases overruled."
This willingness to draw a distinction between the decision in a
particular case and the common law may be one result of the efforts
by lawyers and judges to harmonize the undoubted existence of the
common law as part of American jurisprudence with the fact of the
Revolution and to find an appropriate role for English decisions
rendered after that event. Sitting on circuit in 1808, John Marshall
drew a distinction between principle, which in context seems to be
"the law," and authority, which is clearly made up of cases. English
cases decided after the Revolution "lose that title to authority, which
was conferred by the appellate character of the tribunal which made
them, and can only be considered as the opinions of men distinguished
for their talents and learning, expounding a rule, by which this
country, as well as theirs, professes to be governed." ' 0 His contemporaries who sat as state court judges in Virginia held much the
same views. Judge St. George Tucker cited a post-Revolutionary
English case in an opinion in the supreme court of appeals not as
authority but "as an apposite case decided by able Judges upon the
same law which as to this point prevails in this country." 8' In his
78.
79.
80.
81.
M. HORWITZ, supra note 2, at 42-47.
Noyes, supra note 24, at 58-59.
Murdock v. Hunter, 17 F. Cas. 1013, 1015 (C.C.D. Va. 1808) (No. 9,941).
Baring v. Reeder, 11 Va. (I Hen. & M.) 154, 158 (1806).
LAW IN ANTEBELLUM AMERICA
concurring opinion in the same case, Judge Spencer Roane also looked
to modern English cases, again, not as authority, but "merely as
affording evidence of the opinions of eminent Judges as to the
doctrines in question, who have at least as great opportunities to
form correct opinions as we have .... "82 Chancellor Creed Taylor,
however, expressed this attitude most succinctly: "[I]t was the common law we adopted, and not English decisions." 83
Senator John C. Spencer, rendering an opinion in 1825 as a judge
of the New York Court for the Correction of Errors, then the highest
court of the state, described the authority of English cases in much
the same way. Referring to the New York Constitution's declaration
that the common law continued to be the law of the independent
state subject to legislative alteration, he stated that in the absence
of such alteration he felt himself "as much bound to adhere to that
law, as if it were engrafted in the Constitution in so many words."
He cautioned, however, "that when the judges of England have
applied the principle of the common law erroneously" New York
judges were free to "correct the application, and restore those principles to their original purity." 8' 5
In the decade before the Civil War, the Georgia supreme court
reiterated this view. In an opinion dealing with a complicated question
of will construction, Judge Ebenezer Starnes turned to the common
law for direction. He first recognized that Georgia had adopted the
common law as of May 14, 1776.86 But that conclusion did not end
the inquiry. Judge Starnes observed:
We have also recognized the rule, with a proper qualification, that
in the effort to determine what was the Common Law at that period,
we should consult the decisions of Courts in England, previously made;
and that such decisions are to be regarded as the proper exponents
of the Common Law, as it was adopted by our Legislature.
The qualification on which we insist, is this: These decisions are
to be received as evidence of the Law, and not the Law itself; and
hence, to be conclusive of any question, they should be clear and
87
well settled.
82.
83.
84.
85.
86.
Id. at 162-63.
Marks v. Morris, 14 Va. (4 Hen. & M.) 463, 463 (1809).
Rensselaer Glass Factory v. Reid, 5 Cow. 587, 632 (N.Y. 1825).
Id.
Robert v. West, 15 Ga. 122, 133-34 (1854).
87. Id.
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On the level of theory, then, the distinction between cases and
the law played a useful role in allowing the common law to function
while preserving the reality of American independence. Of course,
Story and the state court judges involved in these cases surely were
aware of the practical effects of their decisions. The cases dealing
with the questions presented in Swift, for instance, are replete with
language showing judicial concern with the law's effect on the business
of banking, on the circulation of negotiable paper and its important
role as a substitute for currency, and on commercial conduct in
situations involving bankruptcy. Mercantile usage also has a role to
play and judges may not totally ignore it nor do they do so. All
these factors, however, are considered within a system of principles
which make up the commercial law, principles which are found in
cases the proper understanding of which is the peculiar responsibility
of judges.
How the judges carried out their responsibilities is the subject of
the rest of this paper. The search for principles which would properly
describe the role of antecedent debt in the law of negotiable instruments occupied several state courts. They provided both the precedents Story used in Swift as well as a testing ground for his resolution
of the problem. How they carried out these roles illustrates the judges'
understanding of the legal world of principle.
III.
THE SEARCH FOR PRINCIPLES
A.
To
GOVERN ANTECEDENT DEBT
The Problem
The question in Swift turned on a much disputed point of the
law of negotiable instruments. Its resolution was most important
because in a world which lacked sufficient specie and dependable
currency, negotiable paper played an important part in providing the
credit necessary for the carrying on of commerce. The critical feature
of negotiable instruments in this world was their immunity from
challenge in the hands of a bona fide holder. The bona fide holder
would obtain payment of the instrument without any concern for
the circumstances of its creation. Simply stated, commercial paper
played the role of currency and that role was played most effectively
if the holder of a promissory note or bill of exchange (the most
common sorts of negotiable paper in Story's day) could ignore the
provenance of the paper. 8
88.
FORUMS OF ORDER
supra note 8, at 1-52.
LAW IN ANTEBELLUM AMERICA
Clearly, then, the great goal was to be a bona fide holder. To
reach that happy status, one had to give valuable consideration in
exchange for the paper. In the run-of-the-mill transaction-an exchange of the paper for goods or cash, or even for an extension
of credit-the requirement was easily met. What was not clear was
whether an antecedent debt was good consideration. If in exchange
for indorsing negotiable paper the indorsee considered as paid a debt
the indorser owed him because of previous dealings between them,
the antecedent debt was the consideration given for the paper. Why
should such a transaction be singled out for unfavorable treatment?
The most prominent antebellum American court to condemn antecedent debt to lowly status explained its holding in terms of the
rationale of the bona fide holder rule.8 9 According to New York's
highest court, the rule itself is anomalous. 9° The court noted that
dishonesty is evil and usually no justification existed for saddling
a defrauded obligor on a negotiable instrument with the obligation
to pay a remote indorsee. 91 If, however, that remote indorsee gave
up something valuable in exchange for the paper, the equities as
between the remote holder and the person who is being asked to
pay him are balanced because, in a sense, they have both been
cheated. 92 Since someone will be hurt, the court reasoned that it
might as well encourage the circulation of negotiable instruments,
which itself is useful to society, by hurting the obligor. 93 In the
antecedent debt situation, the remote holder who is trying to collect
94
on the paper does not have so great a claim on the court's indulgence.
Denying him the right to collect on the instrument will leave him
no worse off then he already is-he will still be the creditor of the
person who passed the paper to him and can still collect his debt
from that person's other assets (if indeed there are any). 95 Therefore,
the court found no justification for hurting the person obligated to
pay and would not consider the holder to be bona fide. 96
It does not take much imagination to see that the appeal of this
argument would be strengthened by the type of fact situation in
89.
90.
91.
92.
93.
94.
95.
96.
Coddington v. Bay, 20 Johns. 637, 645-47, 650, 655 (N.Y. 1822).
Id. at 645.
Id.
See id. at 644-46 (discussing balancing of equities in facts at hand).
See id. at 647 (circulation of bills and notes cannot be impeded).
Id. at 648.
Id. at 647.
Id. at 647-48.
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which the antecedent debt question was likely to arise. On the verge
of bankruptcy, a merchant finds himself with negotiable paper which
itself is valuable because the obligors are themselves financially healthy.
The soon-to-be bankrupt negotiates this paper to certain creditors
whom he favors for one reason or another-they might be relatives
or friends or have agreed to a kickback. The consideration for the
paper so transferred is the reduction of outstanding debts. The favored
creditors then try to collect and discover either that the original
transactions were tainted or that the notes were not even the property
of the bankrupt, or, perhaps more likely, the status of the notes
is unclear and these creditors' complicity in the bankrupt's scheme
is strongly suspected. One way to frustrate the preference given these
creditors is to proclaim that an antecedent (sometimes referred to
as preexisting) debt is not good consideration.
The practice of making accommodation loans added a further
complication to the questions of negotiability raised by the problems
of pre-existing debt. In antebellum America, the use of accommodation paper was a widespread technique for making loans. A
negotiable instrument could be drawn, indorsed, or accepted by one
party solely to enhance the credit of another. A promise by X to
pay to the order of Y could be used as collateral by Y to raise cash
or further credit. Rather than representing actual payment for goods
or services, the instrument had been created solely for the purpose
of increasing Y's apparent worth. Such transactions were not considered to be for good consideration. Yet, should that circumstance
operate to the detriment of the rights of someone to whom this
accommodation paper was indorsed? The question was made more
difficult by the apparently prevalent practice of "cross accommodation" in which two parties simply exchanged mirror image notes,
each guaranteeing the other's promise to pay a sum, thus creating
capital out of nothing. Should disapproval of the practice extend
to denying the negotiability of such instruments, even where they
had been indorsed to an innocent third party who had provided
goods or services in exchange? Since outstanding loans were often
extended on the collateral of fresh paper, much of which was accommodation paper, the question of the validity of an antecedent
debt as valuable consideration was intimately tied up with the practice
of accommodation. 97
97. FORUMS
OF ORDER,
supra note 8, at 9-10, 38-39.
19861
LAW IN ANTEBELLUM AMERICA
Clearly, the resolution of the legal questions surrounding the status
of antecedent debt as consideration was important for every person
engaged in business. The issues involved in reaching that resolution,
however, resonate beyond the world of legal treatises and discussion
of abstruse points of commercial law. At stake were larger questions
going to the economic structure of society, the allocation of the costs
of economic development, the morality of business practices, in short,
a whole host of problems bearing on the definition of a just and
good society. Questions involving the doctrines of negotiability and
of bona fide holder status clearly pose these larger problems since
the application of the doctrine will often require a victim of fraud
to make good on a promise extracted from him by means which
98
exceed the bounds of acceptable practice.
There were other objections to negotiability which seem to be
related to more specific aspects of antebellum thought. Some opponents of the doctrine found negotiability unnecessary for a nation
which did not draw its wealth from commerce as England did. 99 Use
of this argument resonates throughout antebellum thought, touching
off many sympathetic vibrations. Conflict between proponents of a
commercial and those of an agrarian America is a prominent theme
in discussion of the debates over the ratification of the Constitution
of 1789 and the disagreements of the first administration under that
document, debates in which Alexander Hamilton and Thomas Jefferson came to assume almost totemic stature. I°° Indeed, legislative
and judicial hostility to negotiability during the first half of the
nineteenth century was most tenacious in the agricultural south and
west.' 0 1 The appellate opinions rendered in these disputes involving
antecedent debt and negotiability reflect of all these larger concerns.
98. See M. HORWITZ, supra note 2, at 212-26 (discussing rise of negotiability). Horwitz
finds "a sound basis, . . . for the widespread suspicion among noncommercial groups that
negotiable instruments were becoming the vehicle through which oppressive agreements could
be enforced in American courts at law." M. HORwITZ, supra note 2, at 220.
99. M. HORWITZ, supra note 2, at 218. A variation on this argument acknowledged the
relevance of English commercial law but found the particular opposing position as actually
going beyond English precedent and thus totally inappropriate for a nation less commercial
than England. Coddington v. Bay, 20 Johns. 637, 656 (1822); Carlisle v. Wishart, 11 Ohio
172, 188 (1842).
100. A good example of this mutual hostility is the debate over the Judiciary Act of 1801
with its frank Federalist arguments that expanded federal court jurisdiction was needed to
protect commercial interests. See Holt, The First Federal Question Case, 3 L. & HIsT. REV.
169, 183 (1983) (discussing issues over debate on Judiciary Act of 1801).
101. M. HORWITZ, supra note 2, at 225.
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A full consideration of the role of these larger concerns is far
beyond the scope of this paper. What is discussed here is the more
narrow world of legal discourse in which these questions were addressed by courts. Whatever broader agendas lawyers and judges
may have had, they almost always limited their discussions to the
meaning of precedents which defined the general commercial law.
B.
Swift v. Tyson
The facts in Swift involved both rank speculation in wilderness
lands and strong hints that underhanded dealings had taken place
on the eve of bankruptcy. 02 Nathaniel Norton and Jairus Keith had
drawn a bill of exchange on George Tysen for $1540.30.03 Tysen
had accepted the bill, meaning that he had agreed to pay it at
maturity °4 Norton had indorsed the bill over to Swift in payment
of a debt due him from Norton and Keith.10 5 It appeared that Tysen
had given the bill to Norton and Keith in part payment of the
purchase price of some land in Maine which turned out not only
to be worthless but also not theirs to sell.' °6 In addition, the circumstances surrounding the giving of the promissory note of Norton
and Keith to Swift and the fact that after indorsing the bill to Swift
the two erstwhile real estate salesmen disappeared, all hinted that
Swift, Keith, and Norton had attempted to manufacture Swift's status
as bona fide holder in order to allow him to collect the bill in spite
of the hanky panky surrounding the land deal.'0 7 Perhaps in return
Swift gave Norton and Keith enough cash with which to make their
escape. 108
In any event, the case turned on whether an antecedent debt was
good consideration which would support bona fide holder status.
The bill of exchange had been drawn and accepted in New York.
Tysen's counsel argued that the law of New York should govern
the question and that the New York courts did not find a preexisting
debt to be good consideration." 9 Accepting arguendo that reading
of New York law, Story addressed a question of more importance
102.
103.
104.
105.
106.
107.
108.
109.
Swift v. Tyson, 41 U.S. (16 Pet.) 1, 2-3 (1842).
Id. at 14.
Id.
Id. at 14-15.
Id. at 15.
Id.
FORUMS OF ORDER, supra note 8, at 59-61.
Swift v. Tyson, 41 U.S. (16 Pet.) at 10.
19861
LA W IN ANTEBELLUM AMERICA
to his court, namely whether the New York decisions applied? Section
34 of the Judiciary Act of 1789 required the courts of the United
States to use as "rules of decision in trials at common law" the
"laws of the several states, except where the Constitution, treaties,
or statutes of the United States shall otherwise require or provide. . . .",o Story held that the word "laws" in this statute did
not include the decisions of state courts, stating, "[tihey are, at most,
only evidence of what the laws are; and are not of themselves law."'
Not bound, therefore, by the New York cases, the Supreme Court
was free "to ascertain upon general reasoning and legal analogies, .. .
what is the just rule furnished by the principles of commercial law
' 2
to govern the case."
This commercial law, according to Story, is "not the law of a
single country only, but of the commercial world," taking as his
authority a decision of Lord Mansfield which in turn paraphrases
Cicero." 3 He then stated the commercial law on this point, noting
that the "true result" is that an antecedent debt is good consideration.1 1 4 Story observed that if the rule was otherwise, it would
greatly hamper the circulation of paper, a result to be deprecated.
Story noted:
It is for the benefit and convenience of the commercial world to give
as wide an extent as practicable to the credit and circulation of negotiable paper, that it may pass not only as security for new purchases
and advances, made upon the transfer thereof, but also in payment
of and as security for pre-existing debts." 5
More specifically, the contrary rule would cripple the entire banking
system by calling into question "that large class of cases, where new
notes are given by the same or by other parties, by way of renewal
or security to banks, in lieu of old securities discounted by them,
which have arrived at maturity."116 Only after these factors were
established, did Story cite the Supreme Court's own precedents and
numerous English cases in support of his holding, finally concluding
with the statement that in American courts, "the same doctrine seems
7
generally but not universally to prevail.""1
110.
111.
112.
113.
114.
115.
116.
117.
Id. at 18.
Id.
Id. at 19.
Id., quoting Luke v. Lyde, 2 Burr. R. 883, 887 (1759).
Id. at 19-20.
Id. at 20.
Id.
Id. at 22.
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It should be noted that Story's "true result" includes both the
taking of negotiable paper in payment of and as security for a
preexisting debt within the category of "good consideration." Story's
statement about the legal effect of the taking of a negotiable instrument as security for a preexisting debt was pure dictum. In his
separate opinion Justice John Catron said so in no uncertain terms,
"I never heard this question spoken of as belonging to the case,
until the principal opinion was presented last evening; and therefore
I am not prepared to give any opinion, even was it called for by
the record.""' 8
Were Story's assertions about the nature of general commercial
law merely the production of his vanity, or an idiosyncratic view
of the nature of law, the reception of Swift by state courts might
be assumed to have been unremittingly hostile. At the very least,
those who disagreed with Story might have couched their disagreement
in part in jurisprudential terms. Such was not the case. A survey
of the state cases dealing with the antecedent debt issue both just
before and after the decision by the Supreme Court in Swift v. Tyson
reveals state courts dealing with the questions on Story's chosen
ground of general commercial law, whether the meeting be friendly
or hostile. Almost all the discussion takes place within the intellectual
world Story so happily and prominently inhabited.
C. Antecedent Debt in the States
1.
New York
This phenomenon can be seen in the New York cases which preceded
Swift. Because these contradictory New York precedents play such
an important role in all considerations of the question, it is necessary
to discuss them in some detail. The principal New York case was
decided first by James Kent as Chancellor in January 1821 under
the style Bay v. Coddington."9 The case was then appealed to the
court of errors where Kent's decree in the Court of Chancery was
affirmed in 1822 by a vote of 22 to 7.120 The facts of the case were
straightforward. Thomas Bay entrusted a boat which he owned to
Randolph and Savage, who were partners, in order that they might
118. Id. at 23.
119. Bay v. Coddington, 5 Johns. Ch. 54 (N.Y. Ch. 1821).
120. Coddington v. Bay, 20 Johns. 637 (N.Y. 1822).
LA W IN ANTEBELLUM AMERICA
sell it and remit the proceeds to him after deducting their charges.12 '
The partners were indeed able to sell the vessel and, pursuant to
Bay's instructions, took in payment the promissory notes of the
purchasers. 122 Randolph and Savage, however, had fallen on hard
times. After receiving the notes in payment for Bay's boat they
committed an act of insolvency.
123
The defendants, Jonathan J. and Joseph C. Coddington, were
accommodation indorsers on much of the debt of Randolph and
Savage. 24 Should Randolph and Savage not be able to meet those
obligations the Coddingtons would have to make good on them.
Eventually they were burdened with more than $17,000 of the partnership's debt. 25 In order to give their accommodation indorsers
some succor, Randolph and Savage delivered to them the notes they
had received on the sale of Bay's boat. 126 The notes, which, of course,
belonged to Bay, had been indorsed in blank and were perfectly
negotiable on their face. 127 Bay brought a bill in chancery praying
that the notes be decreed to be his and that the defendants be required
to pay him their value.
Bay's case was a strong one. First, Randolph and Savage were
his agents or trustees and, in Kent's words, "it was a gross and
128
fraudulent abuse of trust" to deliver the notes to anyone but Bay.
Second, the Coddingtons were not actually creditors of Randolph
and Savage-their relationship would cost them dearly, but their legal
responsibilities were wholly gratuitous. Of course, as Kent duly noted,
one who took negotiable paper from a defalcating agent or from
anyone who was committing fraud by circulating the paper could
prevail against the true owner so long as the paper was taken "in
the usual course of trade, and for a fair and valuable consideration,
without notice of the fraud.'
' 29
In their pleadings, the Coddingtons maintained that they did not
know that the notes belonged to Bay. Since the case was heard on
121. Id. at 638.
122. Id.
123. Id.
124. Id.
125. Id. at 638, 644.
126. Id. at 638.
127. The accounts of the facts of the case in the two reports differ on the payees and
indorsers of these notes. In any event, the notes were clearly negotiable when they were
delivered to the Coddingtons.
128. Bay v. Coddington, 5 Johns. Ch. 54, 56 (N.Y. Ch. 1821).
129. Id.
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the pleadings only, presumably that assertion was taken as fact. 130
They did not, however, meet the other two criteria. First, they had
taken the notes after they knew that Randolph and Savage were
insolvent. As Kent vividly put it: "[The notes] were seized upon by
the Coddingtons, as tabula in naufragio, to secure themselves against
contingent engagements ..... " Thus, they had not taken the notes
"in the usual course of trade. 1 13 2 Second, they did not take the
notes "in payment, in whole or in part, of any then existing debt,
or for cash or property advanced, or debt created, or responsibility
incurred on the credit of the notes .... "I By Kent's sights they
had not, therefore, taken the notes for a valuable consideration.
Without the giving of valuable consideration by the taker, the entire
reason for the bona fide holder rule fails. The court noted:
It is the credit given to the paper, and the consideration bona fide
paid on receiving it, that entitles the holder, on grounds of commercial
policy to such extraordinary protection, even in cases of the most
palpable fraud. It is an exception to the general rule of law, and
ought not to be carried beyond the necessity that created it.13
Kent therefore declared that the Coddingtons were not entitled to
the notes and referred to a master the task of computing the exact
amount due Bay.
135
The Coddingtons appealed Kent's decision to the Court of Errors.
Their counsel first quoted several English cases upholding the concept
of negotiability, emphasizing the most sweeping language *onthe rights
of the holder. 3 6 He then correctly described the two branches of
Kent's holding below: first, that the notes had not been received in
the course of trade; second, that the Coddingtons had not given
consideration for the notes. 3 7 In light of the English precedents, the
130. Id. at 55.
131. Id. at 57.
132. Id.
133. Id. at 59.
134. Id.
135. The Court of Errors was the highest court of the state until the Constitution of 1846
abolished it and created instead the Court of Appeals, still the highest court of New York.
The Court of Errors was unusual among the highest courts of the states in its membership.
It was composed of the president of the senate of the state, the senators, the chancellor, and
the judges of the supreme court. 5 AMERICAN CHARTERS, CONSTITUTIONS AND ORGANIC LAWS
2646-47 (F. Thorpe, ed. 1909). See generally F. BERGAN, HISTORY OF THE COURT OF APPEALS,
9, 12-14, 19-35 (1985).
136. Coddington v. Bay, 20 Johns. 637, 639-41 (N.Y. 1822).
137. Id. at 641.
LAW IN ANTEBELLUM AMERICA
first was irrelevant to the question of the bona fide holdcr status
of the appellants. The second was badly phrased by the Chancellor.
Whether or not the Coddingtons had given "a new and distinct"
.consideration for the notes was not the proper question. Only a
"valuable" consideration need be given, Lord Mansfield being cited
clearly, "an indemnity against responsibilities" was
in support. And
"valuable." 138 Bay's counsel expressed surprise at the contention that
the Coddingtons were bona fide holders because the facts showed
that they had cooperated with Randolph and Savage in committing
fraud. He devoted all of his brief argument to emphasizing the
fiduciary aspects of the case. 3 9
This appeal to the individual equities of the situation moved appellants' co-counsel to lay bare the policy problems involved, asserting, "The question, who had the greatest equity, does not apply
in this case."" 0 Counsel further argued that if that inquiry were to
decide the matter, there was more than enough hardship on both
sides to go around.' 4' The important thing, however, was not any
personal hardship. Rather, counsel argued that the case must be
decided on general rules of law, and the general rule applicable here
was as important as it was clear:
The great object and policy of the law is to make the circulation of
negotiable paper as nearly as possible the same as money. It is not
a question about goods, but money; and it is on the analogy to cash
that the principle as to negotiable paper stands. The true and only
inquiry is, whether the holder came fairly and honestly by the paper.
The principle is not to be limited and narrowed by the fact of his
advancing money for the 42notes, or by his taking them in the course
of trade, as it is called.
The arguments of the Coddingtons' counsel did not move a majority
of the court. Kent's decree was affirmed by a vote of 22 to 7. 43
Because of the nature of the Court of Errors, however, it is difficult
to say exactly what rule was promulgated by that vote of 22 to 7.
Three separate opinions were given, two by justices of the Supreme
Court, one by a senator. All were in favor of affirmance, although
each took a slightly different approach to the matter.'"4
138.
139.
140.
141.
142.
143.
144.
Id. at
Id. at
Id. at
Id.
Id. at
Id. at
None
639-41.
642-43.
643.
642-43.
658.
of the seven dissenters, all senators, gave an opinion.
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Justice John Woodworth began in a way which may have given
hope to the Coddingtons. Like their counsel, he recognized that both
parties were equally innocent and that the matter could not be decided
on the simple basis of making the guilty party bear the loss. "The
question is one of strict law," Woodworth wrote, echoing appellants'
counsel, "in the decision of which the community at large, and more
especially the commercial part, have a deep interest.' '1 45 Any "fluctuation" in the rules governing commercial paper would disrupt
mercantile affairs. Woodworth believed, therefore, that it was his
task as judge to consider all the cases cited in the arguments before
the court in an attempt to accurately state the applicable rule.'4
The conclusions that Woodworth drew from his examination gave
the appellants no comfort. In every instance in which an innocent
holder of commercial paper prevailed against the claim of the true
owner, according to Woodworth, the holder had given money or
property in exchange for the paper, or had taken the paper in satisfaction of an existing debt, or had incurred some new responsibility
by taking the paper. These were the sorts of transactions which
constitute the giving of value required by the general rule. When
measured by this standard, the Coddingtons' cause failed. At the
time they took the notes that rightly belonged to Bay, their obligations
on behalf of Randolph and Savage were still contingent. "No responsibility was incurred in consequence of taking the notes; they
were received as an indemnity .. . .147 In short, they gave up nothing,
and having given nothing, they could gain nothing from the notes. 48
Woodworth was quite sure, however, that the satisfaction of an
existing debt is the giving of valuable consideration. In this he agreed
49
with Kent's opinion given in the court below.'
Chief Justice Ambrose Spencer too believed that Kent had decided
the case correctly, but his reasoning was not as fully in harmony
with the Chancellor's as was Justice Woodworth's. He began as did
his judicial brother, announcing that the court's task was to "ascertain
a principle, from decisions in cases as nearly analogous as can be
found." 1 0 His analysis, however, was not as clearly articulated. First,
because Spencer considered the "real principle" governing these mat145.
146.
147.
148.
149.
150.
Coddington v. Bay, 20 Johns. at 644.
Id.
Id. at 647.
Id. at 645-48.
Bay v. Coddington, 5 Johns. Ch. 54, 59 (N.Y. Ch. 1821).
Coddington v. Bay, 20 Johns. at 649.
LA W IN ANTEBELLUM AMERICA
ters to be rooted in the idea that the holder who gives valie is as
entitled to be protected from loss as is the true owner of the paper,
he stressed the deceitful conduct of Randolph and Savage and the
injured innocence of Bay. Even admitting that the Coddingtons came
into possession of the notes perfectly innocently, what equities could
they have against Bay? "[M]erely having had the good fortune to
get the notes, without any new consideration, or renouncing any
lien, their equity to hold the notes bears no comparison with that
of the respondent to demand them." 15 ' Second, Kent's emphasis on
the notes not having been taken in the usual course of trade was
well taken, since taking in the usual course of trade is necessary to
give the holder rights against the true owner of paper. In his definition
of the usual course of trade, however, Spencer deviated slightly, but
significantly, from Kent's analysis. "Now, I understand, by the usual
course of trade, not that the holder shall receive the bills or notes
thus obtained, as securities for antecedent debts, but that he shall
take them in his business, and as payment for a debt contracted at
the time. 152 The emphasized language clearly casts doubt on the
assertion by both Kent and Woodworth that the satisfaction of an
existing debt would allow a holder to prevail against a rightful owner.
The seeds of doubt sown by the Chief Justice were nurtured by
the author of the third and final opinion, Senator John Vielie. Vielie
began by acknowledging his adherence to the same method of legal
reasoning advocated by the judges: the true rule governing the question is to be "extracted" from the English cases which are in turn
based on a "commercial policy" dedicated to promoting negotiability
and protecting the bona fide holder." 3 The rule itself was explained
by the senator four times in the course of his brief opinion. First,
he stated that taking paper as indemnity for existing debts would
not confer bona fide holder status; in all those cases in which the
holder has prevailed against the defrauded owner "value has been
paid, or a new credit has been given in consideration of the transfer
itself."' 154 Second, he stated that the reason for the rule-promoting
negotiability-applied only "where money or goods are obtained upon
credit of the paper itself, and not where the transfer is founded
upon a previous credit" because in the latter case the holder loses
151.
152.
153.
154.
Id.
Id.
Id.
Id.
at
at
at
at
650.
651 (emphasis supplied).
653-59.
655.
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nothing if the rights of the defrauded owner are upheld."' Third,
he stated "that no cases can be found where a fraudulent transfer
of negotiable paper was held to divest the true owner of his title,
except where the receiver himself was not only innocent, but directly
prejudiced by the credit given to the paper itself. 15 6 Finally, he took
"the true test . . . to be, that when the holder is left in as good
a condition, after a retransfer [to the true owner], as he would have
been had no transfer taken place there, the title of the owner shall
57
prevail." 1
In context, Vielie's fourth formulation seems to be aimed at the
claim that taking paper as security for an existing debt will confer
bona fide holder status. The paragraph begins with a discussion of
indemnities and the reference in the quoted phrase to the holder's
being left in as good a condition as before the transfer to him would
seem to refer to his retention of the original debt.' 58 The first three
statements, however, are far more sweeping. Asserting that the holder
must give and the transferor receive a new credit, that the transfer
must not be founded upon a previous credit, and that the holder
must incur a direct prejudice by giving credit to the paper gives
strong support to the conclusion that the satisfactioh of a preexisting
debt will not support bona fide holder status. 1 9
It seems reasonable, then, to believe that after the Court of Errors'
decision in Coddington a conscientious attempt to ascertain New
York's law on the question of antecedent debt could lead to the
conclusion that the holder who took commercial paper either in
satisfaction of an existing debt or as security for an existing debt
could not receive the benefits of bona fide holder status. Eventually,
however, the position that the holder who took paper in satisfaction
of an existing debt would prevail over a rightful owner carried the
day in New York. 160
155. Id.
156. Id. at 656. Vielie cited Solomon v. Bank of England, 104 Eng. Rep. 319 (K.B. 1791)
in support of this statement. This was an action of trover for a banknote on which the bank
refused to pay. Id. at 319. All parties admitted that the note had been fraudulently obtained
in the first instance. Id. at 320-21. It is unclear from the report whether the plaintiff-holder
had given any consideration at all to his transferors before the bank informed him of the
note's questionable provenance. After the receipt of such notice, of course, the holder could
not obtain bona fide status no matter what sort of consideration he then gave. Id.
157. Coddington v. Bay, 20 Johns. at 657.
158. Id. at 656-57.
159. Id. at 656.
160. See infra notes 205-24 and accompanying text (discussing case of Stalker v. M'Donald).
LAW IN ANTEBELLUM AMERICA
805
All four jurists, however, agreed that the proper way to go about
resolving the dispute was to ascertain the legal rule that applied to
it, a rule that they all found in English cases. The jurists certainly
disagreed on how to read those cases, but there does not seem to
have been any dispute about their applicability to the question at
hand. None of these men seem to have been sympathetic to that
aspect of the codification movement which expressed distinct hostility
to English law.' 61 They all accepted the existence of a system of
principles the correct explication of which would yield correct answers
to real questions.
It is clear, however, that there is some disagreement as to what
those correct answers were. Coupled with the encouragement of multiple opinions by the unusual nature of the Court of Errors, this
disagreement led to the ambiguous New York precedents which confronted Story twenty years after the decision in Coddington. Eight
cases decided by the New York supreme court between 1832 and
1840 illustrate the confusion sown by the Coddington opinions. In
1832, the New York court, speaking through Justice Jacob Sutherland,
gave a new trial to Gilbert Howell who had been sued by the indorsee
62
of a promissory note on which he was accommodation indorser.1
Howell had lent his name to the drawers of the note so that they
could have the note discounted at bank in payment of another note
about to fall due. 63 The bank rejected the note, however, and one
of the drawers then used the note to pay a debt he owed to the
plaintiffs. ' 64 Sutherland admitted that since the drawer of the note
had fraudulently put it into circulation, the jury verdict for the
plaintiffs meant that they were innocent holders.' 65 They would not
be able to recover, however, unless they were also bona fide holders
for valuable consideration. 66 He then read all three opinions given
in the Court of Errors in Coddington as establishing the proposition
that the satisfaction of an antecedent debt is not valuable consideration, a conclusion he found to be consonant not only with authority
67
but also with "every consideration of justice and equity."'
161. See generally C. CooK, THE AMEsucAN CODtICATION MOVEMENT 84-86 (1981) (examples
of lack of sympathy for movement).
162. Wardell v. Howell, 9 Wend. 170, 175 (N.Y. Sup. Ct. 1832).
163. Id. at 171.
164. Id.
165. Id. at 172.
166. Id.
167. Id. at 173.
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The next year, Chief Justice John Savage spoke for the Court in
Rosa v. Brotherson. 68 In Rosa, the plaintiff sued the maker of a
promissory note transferred by the payee to the plaintiff in payment
of an existing debt.' 69 At trial, the defendant set up a defense against
the payee.170 The trial judge charged the jury that they were obliged
to find for the plaintiff unless they believed that he had received
it with notice of defendant's defense, and a verdict for the plaintiff
was the result.17 ' In explaining the court's granting the defendant
a new trial, Savage laid down a broad reading of the holding in
Coddington.7 2 Claiming to find support in the opinions of both
Woodworth and Spencer, he held that one who received a promissory
note "in payment of a precedent debt or responsibility incurred,
takes it subject to all the equities existing between the original
parties.'
73
To put it more starkly, for Chief Justice Savage at least,
antecedent debt was good for nothing.
Judge Savage reiterated his interpretation of Coddington in Ontario
Bank v. Worthington, decided in 1834.174 In that action, Horace
Putnam had drawn a bill of exchange on the defendant which defendant's agent agreed to accept (that is, promised to pay) so that Putnam
could use the credit created by the acceptance to buy beef for resale
in upstate New York. 7 1 Instead, Putnam negotiated the note to
associates of his who used it to make good on a note of Putnam's
on which they were liable. 76 The bill had thus been taken either in
payment of or to secure an already existing debt. 77 Since Putnam
was already heavily indebted to Worthington at the time the bill was
168. 10 Wend. 85 (N.Y. Sup. Ct. 1833).
169. Id. at 85.
170. Id.
171. Id.
172. Id. at 86.
173. Id. at 87-88.
174. Ontario Bank v. Worthington, 12 Wend. 593 (N.Y. Sup. Ct. 1834).
175. Id. at 594.
176. Id.
177. Savage refered to the bill having been taken "in security of an antecedent debt." Id.
at 600. The facts as recited in the opinion suggest that the bill was taken in satisfaction of
Putnam's note. Savage's statement, however, seems to have been representative of New York
law which was described as tending to characterize such a transaction as the giving of security
unless the contrary was clearly shown. See infra text accompanying notes 246-60 (discussing
similar Maine cases). Such a rule, of course, was unfavorable to the acquiring of bona fide
holder status since even the more liberal position exemplified by Kent and Woodworth found
the taking of paper as security ineffectual in cutting off defenses.
LAW IN ANTEBELLUM AMERICA
drawn, he could defeat any attempt by Putnam to force him to make
good on the acceptance of the bill.
The verdict for the plaintiff in the court below was overturned
and Worthington received a new trial in part because plaintiff could
78
not be a bona fide holder immune from Worthington's defenses.
So much might be expected from the results in the two previous
cases, but this time Savage elaborated on the reasons for the rule,
making the familiar argument that one who gives nothing for paper
loses nothing when his rights are subordinated to those of a rightful
owner or a defrauded drawer or indorser. 179 Savage reasoned that
it is the plaintiff's own failure to inquire into the circumstances
surrounding the paper that leaves him unable to resist defenses to
its collection. 80 Perhaps most importantly, Savage observed, the rule
comports well with the usual state of things in the world of commerce.
It is well known that when debtors are failing, creditors seize upon
anything which affords a hope of payment; it gives them another
chance; but their condition has not been thought to give them greater
equities than other bona fide creditors. In such a case the maxim is
melior est conditio possedentis. It is the fact of parting with property
or incurring responsibility upon the defendant's credit, and that alone,
which gives the superior equity.'
Savage stated his view of Coddington one more time in Payne v.
Cutler.8 2 Cutler had given notes to Joseph Payne in payment for
a boat sold to him by Joseph. 18 3 According to Cutler, the boat turned
out to be "unsound, badly made, and of less tonnage than he [Joseph
Payne] represented it to be, and actually good for nothing."' 14 Joseph
indorsed the notes to Samuel and Abraham Payne in settlement of
his account with them.'8 5 Cutler resisted payment of the notes, alleging
that Samuel Payne was present at the sale of the boat and knew
178. Ontario Bank v. Worthington, 12 Wend. at 601.
179. Id.at 600-01.
180. See id.at 600 (discussing when notes or bills taken in usual course of trade).
181. Id. at 600. Savage's reference is to the maxim melior est conditio possidentis ubi neuter
jus habet (the condition of the possessor is the better where neither of the two has a right).
BLACK'S LAW DicnoNxaY 887 (5th ed. 1979). It is clear from the context that Savage considered
the rightful possessor of the paper-e.g., someone in Bay's position in Coddington, to be
the "possessor" of the maxim.
182. 13 Wend. 605 (N.Y. Sup. Ct. 1835).
183. Id.
184. Id.
185. Id.
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of its deficiencies, and offered proof of both the boat's condition
and Samuel's complicity.186 His evidence was refused and referees
found in favor of the plaintiff, Abraham Payne, to whom Samuel
had assigned his interest in the notes at the time of the dissolution
of their partnership. 187 Once again, Savage spoke for the court and
invoked Coddington for the proposition that the holder of negotiable
paper is insulated from the defenses existing between the original
parties only where "he has advanced money or property, or incurred
liability upon the credit of the note."' 88 Savage reasoned that these
notes were taken by the indorsees in payment of an existing account,
and therefore no property was advanced nor liability incurred in
reliance on them. 89 Cutler, therefore, had the right to offer his
defense of failure of consideration.190 The report of the referees was
set aside and Cutler got another chance. 191
Payne v. Cutler marked the high water mark of opposition to the
bona fide holder rule in the New York supreme court. In 1837, a
reconstituted court decided Smith v. Van Loan. 92 Van Loan had
made a promissory note to one Lewis Wheeler to pay him for services
performed. 93 Wheeler in turn transferred the note to the plaintiff.' 9
There were some problems related to the pleadings in the cause, but
the substantive issue raised by the defendant called directly into
question the role of antecedent debt in the doctrinal structure defining
the concept of negotiability. 95 Van Loan claimed that Wheeler owed
him a sum almost exactly equal to the amount of the note. 96 Since
186. Id.
187. Id. at 605-06.
188. Id. at 606.
189. Id.
190. Id.
191. Id. at 605-06.
192. 16 Wend. 659 (N.Y. Sup. Ct. 1837). Greene C. Bronson and Esek Cowen became
associate justices on January 6 and August 31, 1836, respectively. 1 LEGAL AND JUDICIAL
HISTORY OF NEW YORK 371 (A. Chester, ed. 1911) (reprint 1983). Bronson had been attorney
general of the state and Cowen a circuit court judge. See in 14 Wend. at v, and 15 Wend.
at iii (listing attorney general and Judges of New York Supreme Court of Judicature). Justice
Samuel Nelson was promoted to chief justice on Savage's resignation after May term 1836.
15 Wend. at iii. Nelson was appointed to the United States Supreme Court in 1845 by President
John Tyler where he served until 1872. Gatell, Samuel Nelson, in 2 THE JUSTICES OF THE
UNITED STATES SUPREME COURT, 1789-1978: TnEIR LIVES AND MAJOR OPINIONS, 817-42 (1980).
193. Smith v. Van Loan, 16 Wend. at 660.
194. Id.
195. See id. at 660 (proof that note not given for money but for work and labor could
not change form of remedy).
196. Id. at 660.
1986]
LAW IN ANTEBELLUM AMERICA
Wheeler transferred the note to Smith in payment of an antecedent
debt, Van Loan argued that Smith took the note subject to all the
equities between the original parties and that he could therefore set
off Wheeler's debt to him against the amount the note obligated
him to pay.1 97 The referees to whom the case had been sent refused
to hear Van Loan's evidence supporting his argument and found for
9
Smith.'1
Van Loan moved before the supreme court to set aside
the referee's report.' 99
Justice Bronson wrote the court's opinion denying the motion.
That part of the opinion dealing with the pleading questions and
the rules for assertion of set-offs under New York's revised statutes
is not of particular interest for the antecedent debt question. What
is of interest is Bronson's explanation of Rosa. By examining the
original papers in the action, Bronson concluded that the apparent
holding in that case should be limited in application to situations
where the paper being sued upon had been fraudulently put into
circulation; for example, where accommodation paper was used to
accomplish some other end than that anticipated by the accommodation indorser, or where a note was satisfied but instead of
returning it to the obligor the obligee negotiated it, which was the
case in Rosa, or where the consideration for the note had partially
failed, as in Payne.20°
In other words, only where the party being sued had some equity
entitling him to resist payment of the note did the question of the
bona fide holder status of the plaintiff become relevant. Here Van
Loan did have a claim against Wheeler, but it did not amount to
a defense to the collection of the note. 201 Read carefully, Bronson's
opinion really did not rehabilitate antecedent debt; it only reasserted
197. Id.
198. Id.
199. Id.
200. Payne v. Cutler, 13 Wend. 605, 606 (N.Y. Sup. Ct. 1835). Savage stated the rule as
follows:
It is the doctrine of this court, that the partial failure of consideration may be given
in evidence to reduce the amount to be recovered upon a promissory note between
parties to it. The argument against it is, that any consideration is sufficient to support
the note; and that if there is any consideration, however small, that is sufficient to
justify a recovery for the whole amount. This is fallacious. It may be technically
sufficient, but is not the best calculated to do justice between the parties with the least
expense.
Id. at 606.
201. See Smith v. Van Loan, 16 Wend. at 662 (discussing relevant portions of the revised
statutes). For procedural reasons, Van Loan could not assert the set-off against Smith. Id.
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the possibility of its serving as valuable consideration for a transfer
of commercial paper sufficient to allow the transferee to recover so
long as the obligor did not have some ground for resisting making
good on his promise. By questioning Rosa with its sweeping condemnation of antecedent debt, however, Bronson planted a fertile
seed of doubt.
In the years after the decision in Smith v. Van Loan the New
York supreme court further muddied the waters with a series of
decisions giving bona fide holder status to banks which had taken
paper to refinance existing debt. In each of three cases decided in
1839 and 1840 a bank had taken paper of questionable provenance,
discounted it, and used the avails to pay debts owed it by the person
presenting the paper. In two cases the trial judge had charged the
jury that valuable consideration had not been given, and in the third
the trial judge ruled the bank a bona fide holder. The banks were
victorious in all three appeals, either winning new trials or seeing
a favorable verdict left undisturbed, each court laying down the
holding that the extinguishing of an outstanding debt was the giving
of value. 20 2 In one case, Chief Justice Samuel Nelson cited in support
of his opinion Justice Woodworth's opinion in Coddington, recognizing for what seems to be the first time Woodworth's narrow
holding regarding paper taken as security for antecedent debt and
foreshadowing the Court of Errors' next pronouncement on the issue
in Stalker v. M'Donald.20 All three decisions would seem to be most
favorable for the banks of the Empire State. As was brought out
in the first of the trio, Bank of Salina v. Babcock, the banking
business rested on the perpetual satisfaction of outstanding debts:
It was proved that the course of business at the Bank of Salina with
such of their customers as had large dealings with the Bank and resided
at a distance, as was the case with [the parties from whom the note
was received], was to discount notes from time to time as they were
received and to credit the proceeds on the books, and whenever a
credit stood upon the books sufficient to pay such notes as had come
24
to maturity, to charge the notes, cancel them and send them home. 0
202. Bank of Sandusky v. Scoville, Barton & Mooney, 24 Wend. 115 (N.Y. Sup. Ct. 1840);
Bank of St. Albans v. Gilliland & Raymond, 23 Wend. 311 (N.Y. Sup. Ct. 1840); Bank of
Salina v. Babcock, 21 Wend. 499 (N.Y. Sup. Ct. 1839).
203. Bank of St. Albans v. Gilliland & Raymond, 23 Wend. 311, 313-14 (N.Y. Sup. Ct.
1840); see infra notes 205-22 (discussing Stalker v. M'Donald, 6 Hill 93 (N.Y. Sup. Ct. 1843)).
204. Bank of Salina v. Babcock, 21 Wend. 499, 499 (N.Y. Sup. Ct. 1839).
19861
LA W IN ANTEBELLUM AMERICA
Should the bank not be able to depend on bona fide holder status,
the entire circulation of paper could come to a halt. Clearly, Story
believed as much when he decided Swift. The New York supreme
court seems to have taken a similar view, and as such, there matters
stood when Story wrote his opinion in Swift.
It did not take long for the highest court of New York to pass
its judgment on Story's interpretation of commercial law. In 1843,
the New York court of errors decided Stalker v. M'Donald.2 5 The
case involved facts almost identical to those in Coddington and of
the sort which probably raised the most doubts about the validity
of an antecedent debt as good consideration. A commission merchant
on the verge of bankruptcy delivered to a creditor as security, notes
made payable to the firm but actually representing the proceeds of
sales of a consignor's goods. 20 6 The consignor won a verdict in the
New York City superior court which was affirmed by the supreme
court.20 By the time the creditor's writ of error reached the highest
court of New York, Swift v. Tyson had been decided. 20 8 Delivering
the principal opinion in the court of errors, Chancellor Ruben Walworth acknowledged that "the object of this writ of error appears
to be to induce this court to overrule its decision in the case of
Coddington v. Bay ... and to make our decision conform to the
opinion of Mr. J. Story in the recent case of Swift v. Tyson .... -209
That the court refused to do, voting with but one dissent to affirm
210
the lower courts.
Walworth's subsequent rejection of Swift did not rest upon the
mere assertion of the inability of a decision of the United States
Supreme Court on something other than the "Constitution and laws
of the U.S. and upon the construction of treaties" to bind the highest
court of New York. He made no attack on the power of Story's
Court to decide the issue and thus set down the rule that would be
205. Stalker v. M'Donald, 6 Hill 93 (N.Y. 1843).
206. Id. at 94.
207. Id.
208. Id. at 95.
209. Id. Walworth's contemporary reputation was great. The last chancellor of New York,
he held the office from 1828 until it was abolished in 1846. He was credited with a deep
understanding of the law, and with accomplishing a simplification of equity procedure. I
LEGAL AND JuDICI A. HISTORY OF NEW YORK 337-38 (A. Chester ed. 1911) (reprint 1983). A
modern scholar, however, describes him as "an extremely irascible and unpopular individual",
which qualities led to the withdrawal of his nomination to the United States Supreme Court
for the seat eventually occupied by Samuel Nelson. Gatell, supra note 192, at 823.
210. Stalker v. M'Donald, 6 Hill 93, 114 (N.Y. Sup. Ct. 1843).
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812
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followed in the federal courts. He did make it perfectly clear, however,
that however distinguished an expositor of commercial law Joseph
Story might be, the New York courts had given decisions which were
evidence of what the general law was. He deemed it important to
properly elucidate that general law because:
On a question of commercial law . . . it is desirable that there should
be, as far as practicable, uniformity of decision, not only between
the courts of the several States and of the U.S., but also between
our courts and those of England, from whence our commercial law
is principally derived, and with which country our commercial inter211
course is so extensive.
The rest of the opinion was devoted to a careful examination of
the precedents from which the general law must be drawn. Walworth
first considered the relevant New York cases in order to show that
New York had not deviated from the rule of Coddington in spite
of Story's statements to the contrary. 212 He made a special point of
showing that Bank of Salina and Bank of Sandusky were consistent
with Coddington.2 13 These cases, which Story maintained had "greatly
shaken" the New York rule involved the very situation Story raised
as a horrible hypothetical. 214 Story had maintained that following
the New York rule in Swift would call into question the common
practice of banks' accepting new notes as substitutes for old which
had matured. 215 Walworth, on the other hand, read these two cases
approving that common practice as harmonizing peffectly with the
New York rule on the invalidity of antecedent debt as valuable
consideration.2 1 6 In his view, the banks in those cases really sur217
rendered something for the notes which were subject of the suits.
Walworth could assume such a confident tone in dealing with the
New York precedents because his statement of the principle established
by Coddington and the cases which followed finessed the questions
raised by the ambiguities of Vielie's and Spencer's opinions and
Savage's distinct hostility to antecedent debt. According to the Chancellor, all the cases
211.
212.
213.
214.
215.
216.
217.
Id. at 95.
Id. at 95-96.
Id.at 98-99.
Id. at 98; see also Swift v. Tyson, 41 U.S. (16 Pet.) 1, 17 (1842).
Stalker v. M'Donald, 6 Hill at 98.
Id. at 104.
Id. at 98-99.
1986]
LAW IN ANTEBELLUM AMERICA
fully established the principle that to protect the holder of a negotiable
security which has been improperly transferred to him in fraud of
the prior legal or equitable rights of others, it is not sufficient that
it has been received by him merely as a security or nominally in
payment of a pre-existing debt, where he has parted with nothing of
thus
value, nor relinquished any security upon the faith of the paper
21s
improperly transferred to him without any fault on his part.
A formulation like "received .
.
. nominally in payment" covers
a multitude of judicial sins since it suggests that whether or not
paper has been taken in satisfaction of an antecedent debt is really
a question of fact. Indeed, in Stalker, the question of whether the
paper had been taken as security was left to the jury which first
heard the case. 21 9 In any event, Walworth had managed to limit
disagreement between New York and Joseph Story to the validity
of the dictum in Swift rather than the holding.
Walworth brought to the battle all his erudition. He reviewed the
earliest English cases dealing with negotiability, most of which Story
had not treated individually, in order to firmly establish the rule
that valuable consideration must be given by one who desires to be
a bona fide holder. He then took up the most recent cases which
Story had described as "the latest decisions, which our researchers
have enabled us to ascertain to have been made in the English Courts
upon this subject."220 Examining each case at length, Walworth showed
that none of them directly held that anything other than the absolute
22 1
discharge of an antecedent debt could be valuable consideration.
Turning Story's own weapons against him, the New York chancellor
222
had driven the Justice's dictum from the field.
218. Id. at 98.
219. Id. at 94. The superior court charged the jury that:
[I]f the notes in question were the property of the defendants in error [the consignors]
at the time of the transfer [to the consignees' creditor], and were not taken by [the
creditor] upon any consideration parted with by him on the credit thereof, nor in
payment of the note or [the consignees], but as a mere pledge or collateral security
for that note, then the [consignors] were entitled to recover; ...
Id. at 94, 113. In his opinion, Senator Lott stated that the argument that the creditors had
parted with something of value "was rebutted by the verdict of the jury." Id.
220. Id. at 104. The cases were: Ex parte Bloxham, 8 Ves. Jr. 531 (ch. 1803); Bosanquet
v. Dudman, 1 Stark. I (K.B. 1814); Heywood v. Watson, 4 Bing. 496 (C.P. 1828); Bramah
v. Roberts, 1 Bing. N.C. 469 (C.P. 1835); Percival v. Frampton, 2 Cre. M. & R. 180 (Ex.
1835).
221. Stalker v. M'Donald, 6 Hill 93, 100-10 (N.Y. Sup. Ct. 1843).
222. The only other opinion in the court of errors was by Senator John A. Lott who was
also in favor of affirmance. He limited himself to restating the rule of Coddington and arguing
that on the facts of the case the creditors gave up nothing when they took the notes. Id.
at 113.
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Both judges expounded the commercial law out of the same sources.
Both judges saw the need for uniform law in great commercial matters
and neither seems to have doubted that the uniform law could be
found in the correct reading of decided cases. Neither saw the nature
of federalism as an important issue. In the end, they differed only
over the accuracy of Story's dictum regarding negotiable paper taken
as security for antecedent debts.
B.
Other States
As might be expected, courts of other states dealt with situations
like those in Swift, Coddington, and Stalker. It is difficult to come
to an exact conclusion about the respective authority of the two lines
of cases because of the broad range of fact situations involved, the
confused state of the New York law, and the abundance of dicta.
Story, of course, made a prime contribution to the confusion by
using Swift to proclaim the status of antecedent debt as valuable
consideration whether the instrument being sued upon had been given
in payment of or as collateral security for that antecedent debt.
Justice Catron's separate opinion called attention to Story's strategy
and opined that a mere dictum would not persuade the courts of
the various states, "whereas, if the question was permitted to rest
until it fairly arose, the decision of it either way by this Court,
probably, would, and I think ought to settle it.' ' 223 Chancellor Walworth clearly was not about to yield to dictum. 22 4 Indeed, most of
the disagreement seems to have been on the question involved in
Story's dictum, that is, the receipt of a note or other negotiable
instrument as collateral security rather than in discharge of an antecedent debt. 225 What is clear, however, is that a close reading of
the state cases dealing with the problem decided before and after
Swift shows state judges dealing with general commercial law. Such
a reading also illustrates the importance of the New York precedents
and a widespread perception of their ambiguous nature.
The Supreme Court of Errors of Connecticut engaged in its own
investigation of the commercial law on the question of antecedent
223. Swift v. Tyson, 41 U.S. (16 Pet.) 1, 23 (1842).
224. Stalker v. M'Donald, 6 Hill 93, 95 (N.Y. 1843).
225. Mayer v. Heidelbach, 123 N.Y. 332, 25 N.E. 416 (1890); Yntema & Jaffin, Preliminary
Analysis of Concurrent Jurisdiction, 79 U. PA. L. REv. 869, 885 (1931). On the confusion
in state law see FORUMS OF ORDER, supra note 8, at 36-48; Yntema & Jaffin, supra at 881886 n.23. The latter work contains a clear analysis of the holding and dictum elements in
Swift at the pages cited.
1986]
LAW IN ANTEBELLUM AMERICA
debt in 1836, producing an opinion in the case of Brush v. Scribner
which Story cited with approval in Swift v. Tyson. 226 Plaintiffs, the
firm of Brush & Cook, had received from one Stevens a note made
by Abraham Scribner, payable to the order of John Scribner, the
defendant, and endorsed by him in blank. 227 Brush & Cook applied
the note first to pay Stevens' debt to them in the amount of $112.85
for goods previously sold and paid the balance of the note ($213.65)
in cash and goods. 228 The note was accommodation paper, that is,
John Scribner had endorsed it to enable it to be discounted at a
Connecticut bank for the benefit of Abraham. 229 John had given it
to Stevens for delivery to the Connecticut bank and Stevens had
misappropriated the note to his own use. 230 Since there was no valuable
consideration for the creation of the note-the usual case with accommodation paper-the defendant could avoid paying the plaintiff
if the latter were not a bona fide holder. 231 If the payment of an
antecedent debt was not good and valuable consideration then Brush
& Cook were not bona fide holders to the extent of $112.85.232 The
trial judge left to the jury the question of whether the note was
taken as security for or in "satisfaction and extinction" of the
previous debt, instructing them that if they found the latter situation
to be the case, plaintiffs were entitled to the verdict. 23 3 The jury so
decided and defendant moved for a new trial on the grounds that
the judge's instructions were incorrect.2 14 Before the high court, counsel for both sides cited New York cases in support of their respective
positions .235
Faced with the confusion of the New York cases, the Connecticut
court went back to first principles and produced an elaborate review
of all the English decisions bearing on the question, beginning with
an anonymous chancery case decided at the end of the seventeenth
226. Swift v. Tyson, 41 U.S. (16 Pet.) at 22 (citing Brush v. Scribner, 11 Conn. 387 (1836)).
Story also stated, without providing any citation, that Massachusetts had always adhered to
the rule of Swift. Id.
227. Brush v. Scribner, 11 Conn. 387, 388 (1836).
228. Id.
229. Id.
230. See id. at 388 (defendant's contentions as reported in facts).
231. Id. at 388-89.
232. Id. at 389.
233. Id.
234. Id.
235. See id. at 389-90 (citing Bay v. Coddington, Wardwell v. Howell, Solomon v. Bank
of England, and other New York cases).
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century.236 It was clear to Chief Judge Thomas S. Williams that by
the late eighteenth century Lord Mansfield had settled the law of
negotiability on principles which were conducive to free circulation
of instruments and thus favorable to the expansion of trade. 2 7 Any
limitation of those principles by depriving antecedent debt of the
status of good consideration would cause great problems in the carrying on of day-to-day transactions. 23 8 "Before this court lend their
aid to such an event, they must be clearly satisfied that the law
requires
it.
''
239
And the law examined is English. The same cases
that Chancellor Walworth and Justice Story carefully considered a
few years later figure as prominently here as in those later opinions.
Williams, however, managed to read them all as supporting the status
of antecedent debt as valuable consideration through the simple technique of resolving all ambiguities in favor of negotiability. 24°
The discussion could not avoid New York law, however, because
the note involved was drawn in that state (although it was to be
discounted in Connecticut). Williams pointed out the unsettled state
of the New York precedents, reading Kent's decision in Coddington
as not necessarily deciding that antecedent debt was not valuable
consideration, and correctly noted that some opinions in the case
in the court of errors did intimate that conclusion and that various
lower court decisions had considered those opinions in the highest
court to have settled the matter. 24' Williams concluded that "if this
case was to be decided by the laws of New York, and the reports
of those [lower court) cases are to be considered as evidence of
them," the defendant would get his new trial. 242 The choice of law
question had not been raised at trial below, however, and because
the appellate court felt that justice had been done, it denied the new
trial. 243 The court did note that the New York cases had been "alluded
to" below, but only "as evidence of the common law." ' 2" In other
words, the case had first been fought out in terms of general law,
236. Id. at 390-391.
237. Id. at 391.
238. Id. at 393.
239. Id. at 394.
240. See id. at 394-95 (citation of English cases as support of antecedent debt as granting
bona fide holder status).
241. Id. at 404-05.
242. Id. at 406.
243. Id. at 407-08.
244. Id. at 407.
19861
LA W IN ANTEBELLUM AMERICA
which law, according to the Connecticut court, New York decisions
2 45
did not properly reflect.
There Connecticut law rested. The courts of three other states,
however, took note of the decision in Swift when reconsidering their
own precedents. In Maine, Justice Ether Shepley of the Supreme
Judicial Court addressed the question of antecedent debt and the
New York precedents contemporaneously with the federal courts'
deliberations in Swift v. Tyson. 246 In 1839 in his opinion in Homes
v. Smyth, Shepley stated that according to "the principles admitted
in all the cases" a holder in due course for valuable consideration
is immune to challenges based on the equities as between the original
parties to the note.2 47 He found that the New York cases dealing
with antecedent debt were in perfect accord with those principles
because in that state, as in England, a note taken for an antecedent
debt is not payment for it unless expressly so stated.2 4 Almost always,
a New Yorker who accepted a note for an antecedent debt did not
extinguish thereby the original obligation owed him. 249 "The law of
this, and of some of the other states," Shepley next observed, "is
known to be different, and negotiable paper, received for a preexisting
' ' 250
debt, is payment of it, unless the contrary be made to appear.
In short, to allow the original equities to defeat the collection of
the note would not destroy the debt owed the New Yorker, but
would leave the down east creditor with nothing. In New York,
therefore, all notes received for antecedent debts are really received
for collateral security unless otherwise agreed by the parties. Shepley
noted that the New York courts, therefore, "are deciding in accordance with the principles admitted in all the cases, when they
hold, that in the hands of an indorsee, who takes it for a pre-existing
debt, the same defense may be made as between the original parties"
because in Maine taking the disputed paper would destroy the antecedent debt. Adherence to the New York precedents by the Maine
25
court would violate principle by putting losses on innocent parties. '
245.
246.
247.
248.
249.
250.
251.
Id. at 404-08.
Homes v. Smyth, 16 Me. 177 (1839).
Id. at 180.
Id..
Id.
Id.
Id.
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In the subsequent case of Norton v. Waite, one insolvent New
25 2
Yorker transferred to his New York creditor a draft drawn in Maine.
Justice Shepley noted that from the reports "in the daily papers"
the United States Supreme Court in the case of Swift v. Tyson had
regarded the question of whether the indorsee is subject "to the
equities existing between the original parties" as one "to be decided
by the general mercantile law, and not by the law of the State where
the transfer was made. ' 25 3 Shepley did not discuss Swift, however,
because he found that even if New York law were to apply, the
plaintiff would still collect on the note because there was proof that
it was accepted in true payment of the antecedent debt.2 5 4 In accord
with his earlier opinion and the general principles on which it was
based, therefore, the creditor plaintiff was a bona fide holder in
255
Maine or in New York.
Shepley's two opinions clearly state that the principle of general
commercial law involved in these cases is that payment of an antecedent debt is good consideration and that all the cases, even those
from New York, acknowledge it. He left open, however, the question
disposed of in Story's dictum, since by Shepley's reasoning collateral
security was involved in neither case. The Maine Supreme Court
faced the matter squarely in Bramhall v. Beckett in 1850.256 The case
was submitted to the high court on an agreed statement of facts
which stipulated that the note was given without consideration as
an accommodation note. 257 On the same day, it was indorsed by the
payee to the plaintiffs as collateral security for a debt he owed
them. 258 The court noted, "[n]othing was paid and no claims given
up by the plaintiffs for the note; nor was there any agreement for
any extension of the old debt, nor any other consideration for the
indorsement, except that it was made for said collateral security.' '259
Interestingly, the losing counsel in Swift argued for the defendant
and prevailed.
252. Norton v. Waite, 20 Me. 175, 177-78 (1841). The case apparently was heard in the
July term of 1841, but clearly Shepley's opinion was written after the United States Supreme
Court's decision in Swift in January 1842. Interestly enough, the plaintiff in this case was
Nathaniel Norton, a key figure in Swift v. Tyson.
253. Norton v. Waite, 20 Me. at 177.
254. Id. at 177-78.
255. Id. at 178.
256. Bramnall v. Becket, 31 Me. 205 (1850).
257. Id. at 205, 207.
258. Id. at 205.
259. Id.
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LA W IN ANTEBELLUM AMERICA
Judge Howard's opinion is brief, adopting Chancellor Walworth's
reading of the English cases considered by Story. He found the New
York doctrine concerning notes given as collateral security to be in
harmony with English and American authorities and with principles
of commercial law. He provided a clear statement of the rule that
reflects those doctrines and authorities as the law of Maine:
We hold, however, upon general principles, as well as upon authority,
that the indorsee of an accommodation bill or note, who has given
no consideration for it, and who does not claim through a party for
value, is not entitled to protection against the equities of the accommodation maker, accepter, or indorser; but in the language of Eyre,
C.J., (1 Bos. and Pul. 650,) he is in privity with the first holder,
and will be affected by everything which would affect the first holder.
If he received a bill or note as collateral security merely, for a preexisting debt, without parting with any right, extending any forbearance, or giving any other consideration, the transaction will not constitute a commercial negotiation in the usual course of business and
trade, and he cannot be regarded as the holder for a valuable con2
sideration. 6
Pennsylvania was also willing to adopt Chancellor Walworth's
erudition in preference to that of Joseph Story, but was most concerned with its own precedents. In 1824, the supreme court of the
commonwealth decided Petrie v. Clark.261 In an opinion by Judge
John Bannister Gibson, the court held that the receiving of a note
as security for an antecedent debt which is not thereby discharged
is not a present and valuable consideration and leaves the holder
262
subject to the equities between the original parties to the note.
The maker of the note involved in Petrie had given it to one of
263
two co-executors in payment for goods purchased from the estate.
The note was indorsed in the blank by the payee (who was the
defendant's surety for the purchase money) and delivered to the coexecutor who then delivered it to an agent of the plaintiff to secure
his personal debt. 264 In simple terms, the co-executor had defrauded
the estate and much of the case is taken up with a consideration
of English cases on the rights of purchasers from executors.2 65 The
260.
261.
262.
263.
264.
265.
Id. at 211.
Petrie v. Clark, II Serg. & Rawle 377 (Pa. 1824).
Id. at 386.
Id. at 377.
Id.
See id. at 386-89 (opinion replete with references to English cases).
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situation was egregious and Judge Gibson had no difficulty in finding
that equity and commercial law were congruent, although his discussion of commercial law is cursory. He cited two English cases
on the general subject of negotiability, but in the end rested on
"reason and convenience."
2
66
Judge Gibson's magisterial statements in Petrie were affirmed as
settling the point "without making a parade of learning and research
by the citation of numerous authorities, foreign and domestic, ancient
and modern," in Depeau v. Waddington.267 Although Judge Rogers
believed "there would be no great difficulty in proving that it would
have been better not to have restrained the negotiability of paper
bona fide pledge as a collateral security for a debt . . .; the law is
settled. ' 26 Finally, in Kirkpatrick v. Muirhead the court definitively
rejected Story's dictum in Swift. 269 Judge Bell noted the difference
of opinion between Story and Walworth and suggested that Shelpley's
attempted reconciliation might be correct, thus preserving the unity
of the system. 270 It was enough for him, however, that the Pennsylvania decisions "have recognized the difference between payment
and security only; ruling that the former protects the bona fide holder
against all defenses founded in fraud or latent equities practised upon
or existing between the original parties; while the latter leaves the
door open to every inquiry which would have been pertinent had
there been no transfer of the paper.
' 271
In the end, therefore, the
matter was settled in Pennsylvania by Gibson's early elucidation of
a general commercial law strengthened by Walworth's more elaborate
researches.
The decision in Swift lead the Ohio Supreme Court to overrule
its precedents on the antecedent debt question in Carlisle v. Wishart,
decided in December term of 1842.272 The facts of the case are given
in the report in the most general terms. Wishart made a promissory
note for $666.66 dated August 23, 1838 and due in six months payable
to Joseph S. Benham or order; that is, the note was clearly negotiable. 273 Before it matured, Benham endorsed it to Carlisle in
266. Id. at 388-89.
267. Depeau v. Waddington, 6 Whart. 220 (Pa. 1840).
268. Id. at 232.
269. Kirkpatrick v. Muirhead, 16 Pa. 117 (1851).
270. Id. at 124.
271. Id. at 125.
272. Carlisle v. Wishart, 11 Ohio 172 (1842).
273. Id. at 172.
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LA W IN ANTEBELLUM AMERICA
payment of an antecedent debt. 274 At trial, Wishart gave evidence
to show that the consideration given for the note had failed. 275 The
judge admitted the evidence over the plaintiff's objection and instructed the jury that "inasmuch as the note had been transferred,
in payment of a pre-existing debt, the defendant could make any
defense that he might have made in case Benham, the payee of the
note, had sued the same. ' 276 The jury believed the defendant's evi2 77
dence and found for him. Plaintiff moved for a new trial.
The very generality of the statement of facts (drawn up by the
judge writing the opinion) indicates that Carlisle v. Wishart was
designed to be a test case on the antecedent debt question.2 78 In fact,
in 1838, in Riley v. Johnson, the court had taken the harshest view
of antecedent debt, stating "whoever receives a note, negotiable on
its face, in payment of a precedent debt, takes it subject to all its
equities between the original parties," citing both Coddington and
Rosa.279 The case was a most appealing one, however, since the state
of the case and the conduct of the creditor plaintiff and of Johnson,
the endorser debtor, indicated "that the whole business was previously
arranged between them; and this impression is strengthened by the
'280
subsequent absconding of Johnson, totally insolvent.
The arguments of counsel in Carlisle are extensively reported and
present a thorough examination of the entire antecedent debt
question. 21 1 Carlisle's counsel, Daniel Peck, first analyzed the New
York cases, pointing out the "misunderstanding" of Coddington
which led the Supreme Court of New York to take the extreme
position of Rosa and its modification by Smith v. Van Loan and
generally by the "bank cases. 2 2 He correctly predicted that the
court of errors would eventually restrict Coddington to the transfer
of notes as security for preexisting debts. 2 3 He next analyzed Brush
v. Scribner as both a correct statement of the law and as a correct
reading of the New York precedents. 28 4
274. Id. at 173.
275. Id.
276. Id.
277. Id.
278. See id. at 172 (very general statement of facts as described in report of case).
279. Riley v. Johnson, 8 Ohio 527, 529 (1939).
280. Id. at 530.
281. See Carlisle v. Wishart, ll.Ohio 172, 173-90 (1842) (counsel's arguments reported in
decision).
282. Id. at 174-76.
283. Id. at 175.
284. Id. at 175-76. He then pointed out an interesting example of forum shopping. Id. at
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Finally, he arrived at Story's opinion in Swift itself. 285 The opinion
is fully analyzed, although the dictum regarding notes pledged for
security is glossed over, as one might expect given the facts of the
instant case. The treatment of Story's reading of section 34 of the
Judiciary Act shows no difficulty with the concept of general commercial law. Peck paraphrased that portion of the opinion: "The
section does not extend to contracts, or other instruments of a commercial nature; the true interpretation of which are to be sought,
not in the local tribunals, but in the general principles and doctrines
178. There were two notes involved in Riley v. Johnson, which he described as an "agreed
case." Id. Having lost on one note in the state courts, plaintiff sued on the other in the
United States Circuit Court and "obtained a verdict, under the charge of Justice McLean,
that the payment of a preexisting debt was a sufficient valuable consideration to protect the
holder, without fraud or notice." Id. Defendant moved for a new trial, and the court divided,
no doubt in order to allow certification of the motion of the Supreme Court, where it failed,
seemingly on authority of Swift. Id.
The case referred to is Riley v. Anderson, 20 F. Cas. 801 (C.C.D. Ohio 1841) No. 11,835.
McLean's opinion in Riley v. Anderson reads like a prototype for Story's in Swift. It discussed
the New York cases decided up to that point as the most prominent American precedents
and then noted that Bank of Salina and Bank of Sandusky had "shaken, if not overruled,
the above decisions." Id. at 802. By comparison, Story stated that the same two cases had
"greatly shaken, if they [had] not entirely overthrown those decisions." Swift v. Tyson, 41
U.S. (6 Pet.) 1, 17 (1842).
McLean did not deal with section 34 but did state that the decision of the Ohio Supreme
Court in the earlier Riley case did not need to be followed by the federal court which was
bound only by "the construction of a statute" since "it constitutes a rule of property and
as the rule should be the same in the courts of the United States." Riley v. Anderson, 20
F. Cas. at 802. However, "for the same reason on all questions of a general and commercial
character, the rule established by the federal courts should be followed by the local tribunals."
Id. Finally, "[t]he case under consideration must be considered as resting upon general principles,"
with which the New York cases do not comport. Id.
McLean's statement about general principles of commercial law was perfectly consistent
with his opinion for the Supreme Court in Bank of the United States v. Dunn in which he
wrote, "The liability of parties to a bill of exchange or promissory note, has been fixed on
certain principles, which are essential to the credit and circulation of such paper. These principles
originated in the convenience of commercial transactions, and cannot now be departed from."
Bank of the United States v. Dunn, 31 U.S. (6 Pet.) 51, 59 (1832).
McLean's statement that the federal courts are bound only by state court interpretations
of statutes is not necessarily supported by Story's analysis of section 34 of the Judiciary Act
of 1789 in Swift. At least one scholar sees McLean (whom he describes as "the most nationalistic
of Jackson's appointees") as a critical actor in the "transformation" of Swift from a case
establishing a correct principle of the general law to one justifying the creation of federal
common law on a multitude of subjects. Hollingsworth, Comments on Charles A. Heckman's
Paper "The Relationship of Swift v. Tyson to the status of Commercial Law in the Nineteenth
Century and the Federal System, " and Donald Roper's Paper, "James Kent and the Emergence
of New York's Libel Law," 17 AM. J. LEGAL HIST., 256, 258-61 (1973); see also HARMONY
& DISSONANCE, supra note 8, at 46-99 (discussing how Swift doctrine became part of Constitution).
285. Carlisle v. Wishart, 11 Ohio 172, 173-78 (1842).
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LAW IN ANTEBELLUM AMERICA
of commercial jurisprudence. ' 28 6 Peck further stated that state courts
should, moreover, look to the Supreme Court of the United States
for the elucidation of principles:
Inasmuch as the Supreme Court follows the state courts in the decision
of all local questions, it is but right, so far as the general principles
of the common law are concerned, especially commercial law, that
the state courts should be governed by the Supreme Court; and this
should be done, if not as a matter of absolute authority, at least good
policy would require it. Otherwise, we will have the same question
decided differently in the different courts, in the same state, and it
will lead to various shifts and devices to sue in the court which will
give the most favorable judgment. This would lead to injustice and
28 7
confusion.
In Peck's analysis, good policy would, therefore, require that the
court look to "the Supreme Court of our own country" "for the
rule of decision on such questions. ' 28 8 In other words, the Supreme
Court is the best authority to consult in the task of understanding
the principles of the law which good sense require to be uniform
throughout the nation. Questions of commercial law allow for less
tolerance of differing judicial elucidations of principles. But that was
not the only ground for a decision in plaintiff's favor. "At this
time, bills of exchange and notes, in some form, constitute, in a
great measure, the currency of the country, and, in various ways,
represent the wealth of the land." 28 9 Peck reasoned that such currency,
therefore, should be treated like money, and the rule of Coddington,
at least in its extreme form, would end the circulation of accom290
modation paper.
Defendant's counsel, Thomas Alexander, tried to distinguish both
Brush and Swift by claiming that both cases involved the paying of
value for the indorsement of the note, the former because the indorser
paid a debt of less value than the note, receiving the balance in
goods and the latter because Swift canceled a note of both Norton
and Keith for an indorsement by Norton alone, thereby surrendering
his claim against Keith. 29 1 The greater part of this argument, however,
286.
287.
288.
289.
290.
291.
Id. at
Id. at
Id.
Id.
Id. at
Id. at
180.
181.
181-82.
188-89.
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was directed to proving that the English cases establish the rule that
an antecedent debt is not a valuable consideration which will support
the status of bona fide holder. Alexander then explicitly stated the
relevance of the English cases:
Then why should we, in Ohio, extend a law founded on commercial
policy further than England? Their interests are, in the main, commercial, ours, agricultural. It is from England that Ohio and her sister
states derive their notions of commercial law, and is it reasonable,
or can it be good policy for us to go farther in that direction than
England?
292
Here, then, is opposition to Story's decision in Swift (Alexander's
attempt to distinguish the opinion notwithstanding) which, like other
opposition, accepts the idea of a commercial law appropriate for
commercial nations. While the distinction between the economies of
Ohio and England is a real point of difference with Story's entire
approach to the matter-a point that was made in New York as
well and to the same effect: why go farther than England from
whence we receive our commercial
law 293 -there
seems to be no
question that the concept of general principles was real and that the
task for the court was the proper understanding of the principles.
Peck's argument of commercial uniformity persuaded the court.
Judge Wood first noted that New York seemed on its way to modifying the extreme view of Coddington. Turning to Swift he noted,
It is believed that the law, as thus settled by the highest judicial
tribunal in the country, will become the uniform rule of all, as it
now is of most of the states. And, in a country like ours, where so
much communication and interchange exists between the different members of the confederacy, to preserve uniformity in the great principles
294
of commercial law, is of much interest of the mercantile world.
The holding in Riley subjecting one who takes negotiable paper in
payment of an existing debt to all the equities between the original
parties was overruled "and the reverse now holden to be the law.
' 295
Two other states which addressed the antecedent debt question
after the decision in Swift v. Tyson also approached the problem
in terms of the general commercial law. In 1844, the Alabama supreme
292. Id. at 188.
293. See Coddington v. Bay, 20 Johns. 637, 656 (1822) (noting that commercial law rule
should not be extended further than English rule).
294. Carlisle v. Wishart, 11 Ohio 172, 191-92 (1842).
295. Id. at 192.
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LA W IN ANTEBELLUM AMERICA
court found itself in total agreement with Story in Swift and the
Connecticut court in Brush, holding the payment of an antecedent
debt to be within the usual course of trade and thus resulting in
the status of bona fide holder. 296 "It appears to us," Justice Ormond
wrote, "there is no sensible distinction between receiving a bill in
payment of a preexisting debt, and purchasing it with money or
property. '297 For Ormond such a view merely expressed one of "the
well established principles of the law-merchant. ' 29 Apparently, how-
ever, Story's dictum was not expressive of well-established principle,
and the court indicated that in all likelihood it would not be fol-
lowed .299
The Supreme Court of Arkansas in 1852 resolved the question in
much the same way. Bertrand v. Barkman is full of drama. 3°° Deathbed "loans," promissory notes being brought from city to city for
discount, bearers of the notes being chased from Memphis to Baltimore to Louisville to New Orleans all made an appearance. In the
end, however, the question for decision was the bona fide holder
status of one who took a note as no more than collateral security.3 01
Justice Christopher C. Scott for the court declared it to be the law
that in order to be a bona fide holder in due course the person
taking the note must either give money or property for it "or have
received it absolutely and unconditionally in payment of preexisting
debt, and relinquished some available security or some valuable
right. .... ,,302 He admitted that there had been confusion on this
point, but cited Swift as authority for the holding.3 3 On this point,
he found Swift to be "in accordance with what we think is the
overwhelming current of decisions." 3°4 Story's dictum did not fare
so well, however, and Scott adopted Walworth's view of the authorities. He cited cases from other states which he considered to
agree with Walworth and found them all consonant "with the very
reason of the rule itself ... ."05 If negotiable paper is negotiable
because it is supposed to circulate like currency, then negotiability
296.
297.
298.
299.
300.
301.
302.
303.
304.
305.
Bank of Mobile v. Hall, 6 Ala. 639, 644-45 (1844).
Id. at 644.
Id. at 644-45.
Id.
Bertrand v. Barkaman, 13 Ark. 150 (1852).
Id. at 160
Id. at 159.
Id. at 162.
Id. at 161.
Id.
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should be promoted only when paper serves that role.0 6 When it
is "paid" for something, all well and good; but when given as
collateral security it is not performing the role of "the medium of
the transfer of rights and the extinguishment of obligations, and the
facilitator and expander of trade and commerce. 30 7 Justice Scott
may not have sufficiently appreciated the role of credit in the economy, but he did appreciate correct expositions of authorities and
came down on Walworth's side because his reading of the cases
comported with the reason for the rule.3 t 1 The commercial rule had
a rationale of policy which its principles must express. A court's
statement of those principles must be mistaken if they do not serve
the properly understood rationale.3 °9
On the other hand, New Hampshire's law dealing with the possibility of antecedent debt serving as valuable consideration was settled
before Story's opinion in Swift. In three cases decided in 1839, 1840,
and 1841, Chief Justice Joel Parker held the taking of negotiable
paper in satisfaction of an existing debt, but not the taking of it
as collateral security for that existing debt, to be the giving of valuable
consideration, and also greatly restricted the defenses which could
be asserted by those who made themselves liable on accommodation
paper.31 0 While there is nothing startling in these results, Parker
reached them without any explicit consideration of a body of commercial law and without much discussion of the American and English
cases which were usual foundation for decisions in this area. Instead,
property law concepts provide the framework for analysis. In Parker's
view, when a note is taken as collateral security the endorsee receives
"legal title" to the note but the "general property of the note"
remains in the endorser.3"' Payment of an antecedent debt, however,
does pass "general property" since that is no different than giving
31 2
goods for the note.
The separation of legal title from beneficial ownership is a fundamental concept of Anglo-American property law. Parker seems to
be alone in using it in this commercial law context. A generation
306. Id.
307. Id. at 162.
308. Id.
309. Id.
310. Clement v. Leverett, 12 N.H. 317, 319-20 (1841); Williams v. Little, 11 N.H. 66, 7172 (1840); Jenness v. Bean, 10 N.H. 266, 269 (1839).
311. Jenness v. Bean, 10 N.H. 266, 267-69 (1839).
312. Williams v. Little, 11 N.H. at 71.
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LAW IN ANTEBELLUM AMERICA
later, in fact, Justice William N.H. Allen refused to extend the
"peculiar doctrine" of Jeness and Williams, saying "It is a New
Hampshire idiosyncrasy, rejected by the rest of the world, and will
313
not be followed beyond the limit fixed by the cases asserting it.1'
Parker's independent way of reasoning was also exemplified by his
treatment of the problem of accommodation paper used for a purpose
other than that contemplated by one of the original parties.
14
Clement v. Leverett could be described as an archetypical case.1
Leverett and his business partner accepted, that is, promised to make
good on, two bills of exchange made by Gordon Burley payable to
his own order. 315 Burley was to have the bills discounted for Leverett.3 16 By accepting the bills, Leverett and his partner told the world
that they either, in Parker's words, "had funds of Burley in their
317
hands, or they were indebted to him to that amount [of the bills].
Such may or may not have been the actual state of affairs. Perhaps
Burley was merely doing a favor by "accommodating" Leverett.
Although someone might be unwilling to discount an instrument on
the sole basis of Leverett's credit-worthiness, they might be more
favorably inclined toward an instrument which represented Leverett's
statement that Burley was good for the cash. In any event, Clement,
to whom Burley took the bills, was willing to give cash for them
only if Burley and a surety for Burley were his principal debtors.31 8
Burley found someone willing to be his surety and the two men gave
their note to Clement for a "loan" to them of $2200.319 They also
gave Clement as security for the joint note the bills accepted by
Leverett. 320 The agreed facts state that "it was expected that the bills
were to pay the note." ' 32' The bills were thus collateral security for
the note. The precedent established in the preceding two years by
Jenness and Williams would suggest that the general property of the
notes would remain in Burley and that Leverett could resist Clement's
demand that he make good on the acceptance by asserting Burley's
313.
314.
315.
316.
317.
318.
319.
320.
321.
Tucker v. Bank, 58 N.H. 83, 87 (1877).
Clement v. Leverett, 12 N.H. 317 (1841).
Id. at 318.
Id.
Id. at 319.
Id. at 318.
Id.
Id.
Id.
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breach of faith. Instead of discounting the notes for Leverett's benefit
3 22
Burley used them as collateral for a loan to himself.
Parker, however, asserted that "there is another principle [besides
the basic property law enunciated in the prior cases], of earlier
application, and of paramount influence in this case.
' a23
Parker
reasoned that by accepting the bills, Leverett and his associate made
themselves Burley's debtor and the debtor of anyone to whom Burley
might transfer the bills.124 By leaving the bills in Burley's possession
they gave him the opportunity to make such a transfer.125 Since
Leverett had no defense against Burley, the status of the bills as
collateral security was irrelevant. Clement was the only innocent party
32
and was a bona fide holder.
6
For this last assertion Parker cited two treatises and eleven cases
making a marked contrast with the prior cases where his statements
3 27 The
of the principles of property were more or less ex cathedra.
treatises were Story and Livermore on agency, and all the cases dealt
with the same subject. Only the first case listed (whether for its
importance or because it is the earliest cannot be said), Collins v.
Martin, explicitly addressed the concept of negotiability.3 2 The precise
holding of that case, however, dealt with the authority of bankers
as agents.3 29 Parker reached results similar to those reaches by other
courts, but in his own way, without making extensive reference to
cases dealing with general commercial law.
Parker's independent approach to the problems of antecedent debt
was not the product of ignorance. After extensive experience in both
legal practice and practical politics he had been appointed to the
New Hampshire high court in 1833 and became chief justice in 1838.
In 1848, he left the bench to accept the Royall professorship at
Harvard Law School, ending the search for a permanent replacement
for Story who died in 1845.330 As a practitioner, judge, and teacher,
322.
323.
324.
325.
326.
327.
328.
329.
330.
Id. at 318-319.
Id. at 319.
Id.
Id. at 320.
Id.
Id.
Collins v. Martin, 1 B. & Pul. 648 (1797).
Id. at 651.
For biographical information see P. PALuDAN, A
COVENANT WITH DEATH: THE CON-
(1975); 2 C. WARREN, HISTORY
OF THE HARVARD LAW SCHOOL AND OF EARLY LEGAL CONDITIONS IN AMERICA 114-16 (1970);
STITUTION, LAW, AND EQUALITY IN THE CIVIL WAR ERA 109-13
Joel Parker, AM. L.
REV.
235, 235-69 (1875-1876).
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LAW IN ANTEBELLUM AMERICA
Joel Parker was devoted to legal principle and found in its careful
and logical exposition the heart of legal education. His goal, according
to a recent student of his thought, "was to show that the law was
a complete and homogenous organism, with all its parts linked and
capable of being understood in the dry light of reason." 33' 1 At least
one of his students carried away just that impression:
The lecturer's hour was given to the clearest statement of legal principles, the keenest dissection of cases, and oftentimes to the warmest
discussions of what he deemed heresies of the law ....
Judge Parker
fought for a principle of law as other men fight for life, or family,
32
or for a nation.
Parker was also an independent thinker who seems to have had
no qualms about expressing his own views. While on the bench he
carried on an intense controversy with Joseph Story over the interpretation of a portion of the Bankruptcy Act of 1841.113 After retiring
from Harvard in 1868 he was so stung by the criticisms leveled at
the old regime during the early years of Langdell that he produced
a pamphlet on the school, the tone of which is often biting.33 4 The
one recent study of his thought describes him as "an incisive logician,
sure of his lIw, history, and analysis.""33 In short, while Parker was
devoted to the idea of law as a system of principles, he had utmost
confidence in his own view of what those principles were and of
which principles governed which questions. His "peculiar" approach
to the problems presented by antecedent debt was-not-the product,
at least in his terms, of his "will" but rather of his own, correct,
understanding of an existing system of principles.
Story's efforts in Swift, therefore, had mixed success. However
persuasive his reasoning in situations involving the satisfaction of
antecedent debt, his dictum regarding instruments taken as security
for existing debts generally met the fate Justice Catron had predicted
for it. If the reasoning used in the state court cases that considered
the problems involved in Swift is to be believed, Story failed to
persuade because most judges found the dictum to be contrary to
the general commercial law as established ultimately by English cases.
331.
332.
333.
334.
P. PALuDAN, supra note 330, at 111.
Hale, supra note 329, at 261.
C. WARREN, supra note 330, at 115-17; P. PALuDAN, supra note 330, at 137.
J. PARKER, THE LAW SCHOOL OF HARVARD COLLEGE (1871) (available at Library of
Congress).
335. See P. PALurAN, supra note 330, at 137.
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No surprise was expressed at his jurisprudence. The existence of
general law, of which cases were only illustrative, was not questioned.
IV.
CONCLUSION
Story's opinion in Swift was a product and an illustration of
antebellum legal thought. Whatever its relationship to federalism, it
seems clear that Story's approach to section 34 reflected a view of
the nature of law widespread in his time. Law was a system of
principles which could be discovered through the investigation of the
cases which reflected the principles. Judges had the responsibility of
correctly elucidating principles through the investigation of precedents
and of applying them to the cases before them. The process was
much like that involved in the investigation of the natural sciences:
inductive discovery of principles and deductive application. All judges,
however, were not good scientists. They could and did make mistakes
in finding and applying principles and created confusion in the law.
Confusion in the commercial law was especially to be deprecated.
As a practical matter the efficient carrying on of commercial activity
among nations-and among the states of the Union-required certainty. Attaining that certainty was not difficult, however, because
there was a body of principles appropriate to commercial nations.
Intelligent judges who could properly induce the principles from the
best authorities, which in turn seem to have been based on varying
combinations of reasoning and careful understanding of commercial
usage.
The validity of antecedent debt as valuable consideration sufficient
to create bona fide holder status was an important question which
could not be left unsettled. However practical it might be to overlook
variations among the states on matters purely local, true principles
of commercial law had to be vindicated if America was to be true
to its spirit as a progressive, commercial nation. What was at stake
was an important question of commercial law, a clear understanding
of which had been made more difficult by an ambiguous line of
precedents emanating from the courts of the leading commercial state
of the Union. The reasoning of the New York cases was confused,
but nevertheless they were still influential. Story was trying to clarify
a confused principle by doing what a judge was supposed to do:
use wisdom and understanding to weigh the precedents, to sift the
authorities and make an accurate statement of the principles. It was
an important role and was often poorly done, but it was not the
making of law. Story's view of section 34 of the Judiciary Act was
based on these ideas of judging and of the nature of law.
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LAW IN ANTEBELLUM AMERICA
Of course, it is perfectly possible that Story was completely cynical
in Swift and was doing no more than trying to fasten pro-business
principles on populist state courts. There is some indication that
those who opposed the position Story took in Swift had different
views of America's "spirit." In the eyes of some of the New York
judges the expansion of negotiability was a threat to accepted morality. Similar to those arguments was the assertion that however
accurate Story's elucidation of the principles of the commercial law,
America was not as dedicated to commerce as England and therefore
Story's assertion was irrelevant. We might describe that language as
recognizing that decisions about the extent of the bona fide holder
rule are decisions about who will bear economic losses; yet that is
not what the judges said. Again, the practicalities of the banking
business seem to have had some influence on the cases, but the
nature of that influence cannot be definitively understood from the
language of the decisions.116 The cases simply bring the facts within
the language of the principle that payment of an existing debt is
good consideration.
In the end, we can never know the true motivation of judges who
made decisions about the legal status of antecedent debt; we can
only know what the historical actors have said. In this instance, their
statements are compatible with a belief in general law, at least general
commercial law the principles of which are based in part on usage,
in part on the "right," and which are only evidenced by cases. For
none of them was the primary question in Swift one of federalism,
one of the power of Story's court. His dictum in Swift was resisted
on the grounds that it did not comport with principle, that his reading
of the authorities was wrong.
Finally, this view of adjudicating, reflecting the idea of law as a
system of principles, also seems to comport with general beliefs about
the workings of the world. Montesquieu's ideas of law and the
Baconian view of science provide a link between Story the judge
and Story the person; between his beliefs about law and his beliefs
about the nature of the world in which he lived. After Story's death
in 1845, ideas about the world and ideas about law began to change.
On the way to the world we live in belief in transcendent but knowable
principles, in systems evidently appropriate for whatever type of
336. See also G. DUNNE, JUSTICE JOSEPH STORY AND THE RISE OF THE SUPREME COURT
121, 141-42, 268-69 (1970) (Story president of the Merchant's Bank of Salem while he sat
on Court and probably had first hand knowledge of practicalities involved).
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society we inhabit, was left behind. We cannot begin to understand
Swift v. Tyson and the judge who wrote it unless we distance ourselves
from our world and enter sympathetically into his.